Union lead­ers’ pen­sions get a re­prieve

State’s high court rules 2012 changes un­con­sti­tu­tional

Chicago Tribune (Sunday) - - CHICAGOLAND - By Ray Long [email protected]­bune.com

When Illi­nois law­mak­ers found out seven years ago that ma­jor la­bor lead­ers were sig­nif­i­cantly pump­ing up their tax­payer­funded pen­sions by bas­ing them on their larger union salaries, state of­fi­cials swiftly ap­proved a law to rein in the wind­falls.

Union ex­ec­u­tives cried foul, how­ever, say­ing the changes spurred by a Chicago Tri­bune/WGN-TV in­ves­ti­ga­tion were an over­reach. And af­ter a lengthy le­gal bat­tle, the Illi­nois Supreme Court has sided with the unions, rul­ing the changes un­con­sti­tu­tional and strik­ing a blow to law­mak­ers’ re­form ef­forts.

The court’s unan­i­mous rul­ing last week that once again il­lus­trated how dif­fi­cult it is to cut back pub­lic pen­sions. Jus­tices cited a pro­vi­sion in the Illi­nois Con­sti­tu­tion stat­ing that pension ben­e­fits, once granted, “shall not be di­min­ished or im­paired.”

If that sounds fa­mil­iar, it’s be­cause the court has turned to that same pro­vi­sion to throw out ma­jor ef­forts by both state gov­ern­ment and City Hall to re­duce pension costs in re­cent years.

The city rul­ing led Mayor Rahm Emanuel to in­crease prop­erty taxes, boost the 911 emer­gency telecom­mu­ni­ca­tions fee at­tached to phone bills, and put in place a new sewer and wa­ter bill tax to start con­tribut­ing more money to four city pension funds cov­er­ing po­lice, fire­fight­ers, mu­nic­i­pal em­ploy­ees and la­bor­ers.

The state still has to fix its woe­fully un­der­funded gov­ern­ment worker pension sys­tem, which car­ries a short­fall of more than $100 bil­lion. A small part of that debt is due to a lon­grun­ning prac­tice at the Capi­tol of ap­prov­ing pension sweet­en­ers for po­lit­i­cal al­lies. In Septem­ber 2011, the Tri­bune and WGN found that nearly two dozen la­bor lead­ers from Chicago stood to reap ben­e­fits that could cost ail­ing lo­cal pension plans tens of mil­lions of dol­lars over the course of their re­tire­ments. At one point, fed­eral au­thor­i­ties sub­poe­naed records on the in­flated city pen­sions.

The law al­lowed union mem­bers to take a leave of ab­sence from their pub­lic em­ploy­ment to work in high-rank­ing union jobs, earn years of pub­lic ser­vice credit for their union time and base their tax­payer­funded pen­sions on the more lu­cra­tive union po­si­tions. Union of­fi­cial pension ben­e­fits also could be based on a la­bor leader’s last four con­sec­u­tive high­est-paid years in the decade be­fore re­tire­ment.

The Illi­nois Gen­eral As­sem­bly ap­proved a se­ries of changes de­signed to base the pen­sions of union of­fi­cials on their salaries and ten­ure from the lower-paid gov­ern­ment work­ers po­si­tions. Then-Gov. Pat Quinn signed the re­forms into law in Jan­uary 2012. The state Supreme Court, how­ever, found those changes vi­o­lated the state con­sti­tu­tion, which pro­tects pension ben­e­fits once they’re granted.

“We find noth­ing in the case law, in the text of the pension clause, or in the con­sti­tu­tional de­bates on the clause that would sup­port the state’s ar­gu­ment that the par­tic­u­lar ben­e­fit con­ferred here is not en­ti­tled to pro­tec­tion,” ac­cord­ing to the opin­ion writ­ten by Jus­tice Robert Thomas.

“The state’s con­tention that the del­e­gates and vot­ers did not in­tend that the ben­e­fit at is­sue would be pro­tected by the pension clause is pure spec­u­la­tion and ap­pears to be man­i­festly in­ac­cu­rate,” the opin­ion con­tin­ued.

The suit that over­turned the state law was brought by blue- and white-col­lar city em­ploy­ees as well as Chicago teach­ers and their unions against their pub­lic pen­sions funds. The law’s con­sti­tu­tion­al­ity was de­fended by the at­tor­ney gen­eral. Union reps had no com­ment af­ter the rul­ing.

Some his­tor­i­cal con­text: Since the 1950s, city work­ers who take leaves of ab­sence to work full time for unions have been able to re­main in city pension funds if they choose. The time they spend at their union jobs counts to­ward their city pen­sions.

But few la­bor lead­ers took the deal un­til the law was changed in 1991 to base those work­ers’ city pen­sions on their union salaries in­stead of their old city pay­checks, dra­mat­i­cally boost­ing the amount they could re­ceive. Be­cause that 1991 law bases city pen­sions on the la­bor lead­ers’ union salaries, they re­ceived re­tire­ment ben­e­fits that far out­strip the mod­est salaries they made as city em­ploy­ees. On av­er­age, their pen­sions are nearly three times higher than what the typ­i­cal re­tired city worker re­ceives.

High-pro­file ex­am­ples that trig­gered the 2012 changes in­cluded:

■ Lib­er­ato “Al” Naimoli, pres­i­dent of the Ce­ment Work­ers Union Lo­cal 76. He re­tired from a $15,000a-year city job that he last held a quar­ter-cen­tury ago. Naimoli re­ceived more than $13,000 a month from the city la­bor­ers’ pension fund as he con­tin­ued to earn nearly $300,000 an­nu­ally as union pres­i­dent. ■ James Mc­Nally, for­mer vice pres­i­dent of the In­ter­na­tional Union of Op­er­at­ing En­gi­neers Lo­cal 150. He re­ceived nearly $115,000 a year even though at the time he re­tired, in 2008, he had not worked for the city in more than 13 years. He was 51 when he started col­lect­ing a city pension.

■ Den­nis Gan­non, for­mer pres­i­dent of the Chicago Fed­er­a­tion of La­bor. In 2004, he be­gan re­ceiv­ing more than $150,000 a year af­ter re­tir­ing at age 50 from a $56,000-a-year city job that he had left nearly 13 years ear­lier. He re­ceived his city pension while col­lect­ing a salary of about $200,000 from the fed­er­a­tion. As in most cases, Gan­non told the Tri­bune at the time that he was only fol­low­ing the law in fil­ing for a city pension.

The state Supreme Court rul­ing tossed out the changes for work­ers and re­tirees who al­ready were cov­ered by the pension sys­tem be­fore the law took ef­fect in Jan­uary 2012.

ANTONIO PEREZ/CHICAGO TRI­BUNE 2010

For­mer Chicago Fed­er­a­tion of La­bor Pres­i­dent Den­nis Gan­non got an an­nual pension of $150,000-plus af­ter he re­tired from a $56,000-a-year city job.

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