Illinois Unions Fight to Protect Public Pension Contracts.

When the Colorado General Assembly breached public pension contracts in 2010 the actuarial funded ratio (AFR) of the Colorado PERA trust funds was a mere 3 percent lower than the average AFR among the states.  Illinois public pension plans have been consistently near the bottom in the ranking of U.S. public pension plan funded status, and have faced far more stress than the Colorado PERA trust funds.  Yet, Illinois public sector unions are not proposing that the public pension contracts of their retired union “brothers and sisters” be breached.  

In 2010, Colorado public sector unions supported the breach of PERA retiree pension contracts. This act by Colorado public sector unions represents the greatest act of treachery perpetrated by public sector union officials and lobbyists on their union brethren in the history of the U.S. labor movement.  Rather than betraying their retired union members, Illinois’ public sector unions have banded together to aggressively defend all public pension contracts.  (Note that this claim of unprecedented treachery on the part of Colorado public sector unions is not hyperbole . . . try to find a more egregious example of treachery perpetrated on fellow union members in the United States, it does not exist.)

The Illinois public sector union proposal:

“Leaders of the We Are One Illinois coalition released studies today to shed light on the devastating, unfair and unconstitutional pension cuts in the (Governor) ‘Quinn plan’ and to detail the recommendation of the group, which includes IEA, to address Illinois’ fiscal dilemma.”


“Dan Montgomery, president of the Illinois Federation of Teachers, said, ‘Our union coalition is certain that working together with legislators we can do better than what has been proposed so far – certainly illegal schemes that wreak economic havoc.'”

We Are One Illinois comments on public pension COLAs:

“Because, by design, the diminished COLA is sure to lag inflation, income replacement rates in retirement would fall to 40% to 60% of final pay after twenty years of retirement under the Quinn plan.”

(My comment:  In light of the support of the Colorado PERA Board of Trustees taking of the contracted PERA COLA benefit, I find the Colorado PERA Board of Trustee’s official inflation assumption of 3.75 percent truly damning.)

“These cuts are particularly troubling considering that retirees are more susceptible to inflation because of the services they tend to consume, such as health care.”

“The framework recommendations would: codify an ironclad guarantee that compels the state to make actuarially – sound pension payments – with a guarantee in place, ask employees to gradually pay 2 percent more of their salaries into their pensions – close approximately $2 billion in corporate tax loopholes to provide revenue to support critical services and operations, so that the state stops borrowing from its pension systems to pay its operating expenses.”

Press release:…

(My comment: Should Colorado, as the 15th wealthiest states in the nation [and a state that enjoys one of the lowest tax burdens among the states] be permitted to breach its contractual pension obligations in order to further reduce that tax burden?)

From the

“State employees would pay more toward their retirement costs, but some corporations also would face higher taxes under a long-sought pension fix being pushed by Big Labor.”

“A coalition of unions representing teachers, university employees, prison guards and other state workers unveiled a proposal Wednesday aimed at showing Illinois lawmakers and Gov. Pat Quinn that they want a role in crafting a solution to the state’s massively underfunded retirement systems.”

“In its 30-page report, the unions highlight how employees have continued to make contributions to the state’s pension funds while state lawmakers and past governors failed to make adequate payments into the system in order to use the money for other programs.”

“As part of their solution, the unions want lawmakers to write into law a guarantee that the state pays what it owes to the retirement systems.”

“‘If such an ironclad guarantee is provided, we believe employees would be prepared to pay an additional 2 percent of their salaries, phased in over two years.  This raises real money for the systems – approximately $350 million annually once fully phased in.  It is consistent with the principle of shared sacrifice,’ the report notes.”

“In addition to higher employee contributions, the unions are backing a series of business and corporate tax increases that could raise as much as $2 billion annually.”

“Among the proposed corporate tax changes are a new tax on satellite television providers, an end to a tax break on newspaper ink, a reduction in subsidies for ethanol producers and a reduction in tax breaks for film production.”

(My comment: Add these suggestions for raising revenues to support public pension obligations to our list of dozens of “less drastic” alternatives to the breach of public pension contracts by the Colorado General Assembly.)

“Downstate lawmakers, many of whom say they support a pension overhaul, would be faced with having to vote on an end to an exemption on farm chemicals, which would bring in an estimated $50 million.”

“Todd Maisch, governmental affairs director for the Illinois Chamber of Commerce, said legislative leaders have not indicated support for the tax changes in the past.”

(My comment: Colorado’s House Speaker at the time of the Colorado General Assembly’s pension contract breach was Representative Frank McNulty (R-Highlands Ranch.)  On July 14, 2009, Rep. McNulty said that he did not want to ask for higher contributions from PERA-affiliated employers to address the Legislature’s underfunding of the PERA pension:

“I don’t think at this point we can expect employer contributions to be part of the solution . . .”


Back to Illinois proposal:

“According to the report, the two (alternative) current pension proposals would not only be unconstitutional but would be devastating to retirees, who would see their inflation-adjusted purchasing power decline by as much as 30 percent as they get older.”

“In particular, the unions said the plans, which include raising the retirement age and reducing cost-of-living adjustments, would be tougher on teachers, who are ineligible for Social Security benefits.”

(My comment: Recall the words of Colorado PERA Executive Director Meredith Williams at the initial [Denver] meeting of PERA’s 2009 Listening Tour; “I might also add that the vast majority of PERA retirees and PERA members do not participate in the Social Security program.  PERA is their retirement plan.”)

“In the end, an unconstitutional pension change would be nullified by the court, and the legislature would have, once again, merely kicked the can down the road, the report notes.”

(My comment: A favorite quotation, ” . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.”

Gino L. DiVito, Tabet DiVito & Rothstein LLC, Chicago, ILL)

Link to the full article at…

2 Community Comments, Facebook Comments

  1. I am amazed that the spin regarding pension funds has already been accepted by state workers including judges.  

    Why isn’t anyone looking at the true reason?  Isn’t it because of what the banks did? And Michael Bennet’s derivative bet is causing huge losses but isn’t it true that equally devastating is the impact of all these illegal foreclosures in the state of Colorado?  After all the pension funds are changed with the entire loan/note amount reduced by the foreclosure mill attorney fees, the taxes and homeowners insurance and the repairs and maintenance.  I’ve heard that the charges can be in excess of the original investment.  What is being done about it?  Is that even on their radar?  

  2. This is such an important issue.  Did you know that the investors for pension funds have no recourse to sue the banks for destroying pension funds.  

    Personally I think investment managers need to get out of investing in mortgage-backed securities.  And they need an new strategy for hiring investment managers.  Why? Because the current ones serve the banks not the pensioners.  

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