It’s a tired story by now in Illinois: the graduated income tax state constitutional amendment on the ballot this past November failed because of a fundamental lack of trust by the people of Illinois in their elected officials. That’s not just my own claim; new House Speaker Chris Welch said as much, according to the Chicago Tribune, in making a pitch for another try at an amendment in which they would pinky-swear to use new tax money only for good purposes:
“In evidence by the failure of the progressive tax, folks don’t trust us . . . If we can rebuild that trust, it’ll be amazing what voters will help us do.”
And this same lack of trust is at least part of the reason why an amendment to the state constitution to eliminate the “pension protection clause” is a nonstarter. Yes, some Illinoisans believe that under no circumstances should benefits be altered for anyone, even the fat cats taking home more in pension benefits than they ever earned in public office, as was the subject of a WGN report on Tuesday. But others have been persuaded that any changes to pensions will impoverish the elderly, and are understandably worried — in other words, the electorate has as little trust in Illinois’ Republican legislators as in Democrats.
That’s why I had suggested in my Tuesday article a constitutional amendment that builds in protections for low- or even middle-income state workers, for example:
“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, for any plan participant whose salary or retirement benefit is less than the median salary or retirement benefit, respectively, in the state of Illinois” (addition in italics).
Does this sound off, too narrow and detailed? Should constitutions provide general principles and leave the specifics for legislation? Sure, yes, in principle, it would be nice to simply remove this clause from the Illinois constitution, but that’s not a realistic option.
And, in fact, the experience of Arizona five years ago suggests that the most pragmatic path, with the best chances of success, is exactly this very narrow, clunky, amendment.
Alexander Volokh chronicled the path Arizona took to its constitutional amendment, a change to its pension clause which, prior to the amendment, was essentially identical to that of Illinois: “Public retirement systems shall not be diminished or impaired.”
In 2016, Arizona’s Public Safety Personnel Retirement System (PSPRS) was almost as unfunded as Illinois’ pensions, at 48% funded. Key stakeholders from both parties, and including the public safety unions themselves, recognized that change was needed, and the Pension Integrity Project team at Reason Foundation worked together with them to create a set of changes, primarily focused on reforming its out-of-control cost-of-living adjustment system, as well as instituting a risk-sharing system for new hires (with a proper actuarial analysis conducted at the time!), and new governance reforms, all of which together comprised S.B. 1428.
But how did Arizona ensure that this bill, which did, after all, cut (future) benefits for existing employees, would not be overturned by the Arizona Supreme Court? Through a constitutional amendment, Proposition 124. The text of this amendment? The italicized portion of the following:
“Public retirement systems shall not be diminished or impaired, except that certain adjustments to the public safety personnel retirement system may be made as provided in Senate Bill 1428, as enacted by the fifty-second legislature, second regular session.”
Honestly, I find this a bit mind-blowing.
This is nothing at all like what we expect from a constitutional amendment. It’s clunky, awkward. It feels like defeat, to acknowledge that this is the best we can do rather than the “pure” change of removing the trouble-making clause entirely.
But it worked. It passed by a 70-30% margin.
Would Illinois voters (or the Democrats who currently fully control the state) be willing to approve an amendment narrowly-tailored enough to ensure pension cuts only apply to the highest earners in the state?
Could Pritkzer have passed his graduated tax amendment if there had been guarantees built into the amendment itself, rather than having voters write a blank check to the legislature? The proposed amendment, after all, merely struck the requirement that any income tax be non-graduated; it was neat, clean, but should it have been more detailed to offer voters assurances that it would neither attempt to boost taxes one bracket at a time, divide-and-conquer style, nor attempt to fund government through such high rates on higher earners that they leave the state?
I don’t know. But I continue to mull over the question of whether this sort of amendment, which fully acknowledges voter mistrust and constrains the legislature as a result, is what Illinois, and states similarly trapped, need to be able to move forward.
As always, you’re invited to comment at JaneTheActuary.com!