October 5, 2012 (PLANSPONSOR.com) – An Illinois constitutional amendment that concerns authority to make public pension plan changes is scheduled for the November ballot, according to news reports.
The Gazette of Chicago reports that currently, the Illinois Constitution states in Article XIII, Section 5: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” The newspaper said Amendment No. 49 would allow restricting or eliminating a benefit with a simple majority vote of a governing body, effectively overturning and superseding Article XIII, Section 5’s clause prohibiting benefits from being diminished or impaired.
If passed, the amendment would help Illinois avoid the fate of several other states. A coalition of unions in Michigan won a lawsuit against a 2011 law that requires state employees to opt out of their defined benefit pension plans or start contributing 4% (see “Mich. Unions Win Benefits Battle”), and just this week, a group of unions representing Maine employees was allowed to join a lawsuit that claims the elimination of cost-of-living adjustment (COLA) benefits for retired employees violates the state’s constitution as an unlawful taking of property without just compensation and a violation of the contract clause (see “Unions, Retirees Sue Over Maine Pension Changes”).
So far, there’s been nothing close to an agreement on how to close the $85 billion gap between the state retirement system’s assets and obligations—which has helped Illinois earn one of the lowest credit ratings in the nation. Lawmakers do not yet have a plan to fix it and are not expecting to take up the issue until after the November election (see “Pension Fears Prompt Surge of Retirements at Ill. Universities”).
A recent research report suggests legal constraints make it difficult for public pension plans to adjust to changing economic and demographic conditions (see “Legal Constraints Hurt Public Pensions’ Adaptability”).