A state Supreme Court decision in Rhode Island could possibly remove a hurdle to reforming Illinois’ pension debt load, but an expert said lawmakers here would first have to change course.
Rhode Island’s highest court ruled earlier this month in Cranston Police Retirees Action Committee v the City of Cranston that the city could freeze a cost of living adjustment for its police and firefighter retirees and not break the U.S. Constitution’s Contract Clause protection.
Mike Stenhouse, CEO of the Rhode Island Center for Freedom and Prosperity, said the city of Cranston’s budget was so upside down that the benefit freeze was deemed reasonable and necessary, a designed exception in interpretations of the clause.
“Cranston was in such financial distress that you couldn’t reasonably tax anymore,” he said.
Stenhouse said he hopes the retirees who challenged the decision appeal to the U.S. Supreme Court.
Ralph Martire, with the Chicago-based Center for Tax and Budget Accountability, said Illinois wouldn’t make it that far because the state’s constitution protects any pension from being diminished.
“Illinois, like just a couple of other states in the U.S. being Arizona and New York, has airtight constitutional protections for the benefits an employee’s entitled to earn in a public system,” he said, adding that any theoretical change to pensions couldn’t be retroactive, but there’s no concrete legal precedent for ex post facto application to the Contracts Clause.
Democrats in control of the General Assembly have shown little appetite for changing that protection, even though the state has more than $137 billion in unfunded pension liability, billions more in unfunded healthcare costs. Municipalities in Illinois have billions more at the local level for police and fire pensions.
Mark Glennon, founder of Wirepoints, said the important aspect of the Rhode Island opinion is that it refutes a common talking point that changing Illinois’ constitution to allow for changing established pension contracts is a fool’s errand because the Contracts Clause would kill the effort.
“We’re applying the same law that would be applied in Illinois if we ever follow the same route and the same challenge was there,” he said.
Martire said that even the statutorily required amount isn’t enough to start paying down the state’s pension debts and proposes a combination of higher payments and small bonds to get the state to higher pension funding levels.