IL Judge Rules that
Government Retiree Health Benefits are Not Protected by State Constitution
Sangamon County Circuit Court Associate Judge Stephen Nardulli dealt a blow today to government employee unions who have long contended that retiree health benefits are protected by the Illinois Constitution.
Nardulli granted the state’s motion to dismiss a lawsuit brought by former appellate Judge Gordon Maag and other plaintiffs seeking to overturn a new Illinois law allowing the state to charge state retirees for health insurance.
“There is nothing surprising here,” said Jonathan Ingram, an attorney and a senior fellow for pension policy at the Illinois Policy Institute. “We have been saying for at least two years that retiree health insurance and pension benefits are different and that Gov. [Pat] Quinn could act on his own to have retirees pay more for their health insurance.”
Nardulli noted that retirees are not parties to collective bargaining agreements.
“They can appeal this but I’m confident that the appellate court and the state Supreme Court will agree with the lower court,” Ingram said.
“If one were to accept the premise that health insurance benefits are vested rights that accrue upon retirement, one must accept the premise that those benefits cannot be reduced, regardless of changing medical technology or the willingness of insurance providers to make a particular policy of health insurance available,” Nardulli said in his decision.
“The fact that medical technology and contracts offered by insurance companies change, as opposed to the actuarial certainty of a pension payment, lead this court to the conclusion that health insurance benefits are not the same as a pension protected by the Pension Protection Clause.”
Senate Republicans author study that debunks Madigan’s ‘free lunch’ claim
Chicago and downstate pols having been fighting over state money ever since the Windy City rose from the swamps along Lake Michigan.
So regional funding squabbles are nothing new in the Illinois General Assembly.
But to hear House Speaker Mike Madigan talk, one might think a bunch of downstate yokels are chowing down on feast and expecting Chicago to pick up the tab.
The Chicago Democrat says that downstate and suburban schools districts are getting a “free lunch” when it comes to state funding of pensions. And to a certain extent he is right.
Illinois taxpayers contribute $67 more per pupil to the Illinois Teachers’ Retirement System, which serves downstate and suburban school districts, than to the Chicago Teachers’ Pension Fund, according to a study recently completed by the Illinois Senate GOP caucus.
But there’s more to the story. The same study found that Chicago was receiving $2,223 more in state money per pupil for educating children than the school districts outside of the city.
The study’s authors came up with that number by dividing the amount of state aid going to Chicago by the number of students in the district. They then took the aggregate amount of state money going to the other 862 Illinois school districts and divided by the number of pupils in those districts. The downstate and suburban number was subtracted from the Chicago number.
That’s how they found the $2,223 funding disparity.
This fact has been obscured by Illinois’ extraordinarily complex education funding system that treats school districts across the Land of Lincoln differently. Six major types of state grants are used to help fund the 863 school districts scattered across Illinois.
And that complex formula can have unfortunate outcomes.
For example, a school district educating a child living in poverty in downstate Edwardsville receives only 15 percent of the state poverty grant money that a Chicago student living under comparable circumstances would, the study found.
Perhaps not surprisingly, legislative Republicans are calling this disparity “Chicago’s Free Lunch.”
It’s high time that Illinois had a comprehensive look at how it spends its education dollars and what constitutes good public policy. What’s best for students, educators and taxpayers?
To be sure, Chicago Public Schools face extraordinary challenges because of the high concentrations of poverty within the city. Still, the amount of state money pouring in per pupil outpaces other school districts across Illinois to a head-scratching degree.
On the other hand, Madigan is correct in calling for local school districts to take greater responsibility for funding educator retirements.
When a school district opts to give a superintendent – or a group of teachers – a raise that ultimately boosts pension costs, this translates into an unfunded mandate from a local school district to all state taxpayers.
Instead Illinois should step away from the defined benefit pension system altogether and allow individual school districts to make contributions to 401(k)-type retirement plans for its employees.
Senate Republican Leader Christine Radogno said she doesn’t want the education funding issue to be addressed this year because it would divert attention away from the critical task of pension reform. The reason Republicans are bringing it up, she said, is to add greater context to the pension debate.
“I’m a social worker by training,” she told me Monday. “I understand that it takes more resources to educate a child living in poverty. But that’s not the only reason Chicago gets more. For example, state special education funding is based on 1995 population distributions even though Chicago’s numbers have gone down since then. That’s not fair to suburban and downstate kids.”
Radogno said she is bringing up the issue of education funding inequities now to shed more light on the Madigan’s comments.
“I was very startled by the tone of Madigan’s comments,” she said. “It wasn’t a prudent or helpful thing for him to say. I’m not trying to start a regional fight, but we need to have a better idea where money is going.”
When it comes to the AFSCME contract, taxpayers still in the dark
I was chatting with a friend the other day who is a state bureaucrat and a member of the American Federation of State, County and Municipal Employees. She had an interesting analogy for labor negotiations.
“I’ve always felt it was like professional wrestling. Each side tries to fire their base up – but it’s really all choreographed ahead of time . . . Well, every contract they get people going. Yet they always vote for the Dem (even after all the bad mouthing). ”
Now, that is just one person’s perception. But when it comes to the most recent contract agreed upon by the state and AFSCME, my friend seems to be on target. There is a lot we don’t know about the contract – because it hasn’t been released to the public yet.
Abdon Pallasch, a spokesman for Gov. Pat Quinn, said Thursday that copies of the contract are not being released because lawyers are still making revisions and it has yet to be signed.
But shouldn’t the taxpayers know what the governor is committing them to paying before it is signed? After all, there is a basic democratic principle in play: An informed citizenry can hold its government in check. But how can we hold Quinn accountable if the information we receive is only what he chooses to share?
AFSCME members must think the contract is a good deal – 96 percent of them voted in favor of it this week. But even they were dependent on reading summaries of the contract prepared by union leadership rather than being able to read the contract itself.
Two questions that come to mind:
How much will state worker pay raises called for in the contract cost taxpayers?
How much will taxpayers save by having state employees and retirees contribute to their health insurance?
Right now, we are dependent on what we are told.
Not surprisingly, politicians – like most folks – want to put their best foot forward when describing their actions. Quinn claims that the contract will save $900 million in health insurance premiums for the taxpayer.
Here is how Pallasch described the savings:
“Current employees will see higher health insurance rates, co-pays, etc., that vary based on their plans – that will bring in about half the $900 million over the life of the contract. The other half will come from the retirees, who, effective July 1, will start paying 1 percent of their annuity for Medicare retirees, 2 percent for non-Medicare. That rises to 2 percent and 4 percent, respectively on July 1, 2014.”
Not so fast, said Illinois Policy Institute Senior Fellow Jonathan Ingram.
“Quinn’s deal is also structured in a way that will incentivize retirees to choose Cadillac coverage over the less expensive HMO options,” Ingram said. “Because premiums are not tied to the actual cost of the plan selected, retirees will pay the same regardless of which plan they pick. They’ll have no incentive to choose a lower-cost option.
“This perverse incentive could be quite costly. The difference in costs between the Cadillac plan and the average HMO is more than $2,400 per year for a retiree not yet eligible for Medicare. Taxpayers can expect to see some of the savings wiped out entirely by retirees switching to higher-cost plans.”
Ingram was able to determine this by analyzing a portion of the AFSCME contract that had leaked out ahead of time. But we are still waiting to see contract details involving current employees.
Quinn contends that pay raises in the contract will amount to no more than $200 million. But again, because the contract is under wraps, we are left taking his word for it.