by Vladimir Shuliga, Jr. (Fall 2016)
While the attempts at broad pension reform have recently failed to withstand constitutional scrutiny, the Illinois legislature has passed some less earth-shattering laws attempting to curtail various abuses of the pension systems. The Local Government Wage Increase Transparency Act, signed into law on July 28, 2016, tries to tackle pension spiking (50 ILCS 155/1 et seq.). While this new law indicates that the Illinois General Assembly has not lost sight of the ongoing pension crisis throughout the state, the law’s limitations reflect the difficulty the legislature has had in passing broad based, impactful reform.
Under the new law, an employee receives a raise of greater than 6% between the last three months and last twelve months of employment (whether it is a wage rate increase or a lump sum payment), after that employee gives his or her intent to retire, the employer must make certain disclosures at an open meeting. The Act requires that an employer, at an open meeting, must disclose the employee’s name, the purpose and amount of the increase or payment, the proposed retirement date, the effect of the payment on the employee’s expected retirement benefit, and the effect of the payment upon the employer’s pension liability.
The Act also amends the Open Meeting Act to require any meeting held to consider an increase that meets the specifications provided in the statute be held in open session. (5 ILCS 120/2 (c) (1)). This is a drastic change to the first exception in the Open Meetings Act which allows a public body to enter closed session to discuss the employment, compensation, and performance of specific employees of the public body.
If those terms were applied to public employees across the state, the impact could be significant. However, the law is intentionally self-limiting. The Act only applies to non-union Illinois Municipal Retirement Fund (IMRF) employees who began participation in IMRF prior to January 1, 2011. The sponsor of the bill stated that the Act does not target union employees, but is aimed at employees in managerial positions who are in a position to negotiate sweetheart deals. Although the Act nearly passed both houses unanimously, critics of the Act call it a “press conference” bill that does little to address the pension crisis.
The real impact of the Act remains to be seen. Rather than putting statutory limitations on so-called “pension spikes,” this law aims to create a vehicle for political pressure on local government leaders to minimize the occurrence of pension spikes. As such, this new law is a variation of a 2005 law aimed at school districts, which required a school district to pay a penalty to the state for any raises greater than 6% given to a teacher just before retirement (see 40 ILCS 5/16-158 (f)). While the law has been very effective in curtailing pension spiking in certain districts, other school districts have simply chosen to pay the penalty.
Similarly, this statute will invariably have its success stories where an engaged public can exert sufficient public pressure on local officials to put an end to pension spikes. There will also undoubtedly be instances on the other end of the spectrum where a public body will go through the requirements of the Act in an open meeting where there will not be a single member of the public attending. By relying on public pressure, the effectiveness of the statute will be a mixed bag.
The aim of the law is narrow and the mechanics of its requirements are not difficult. However, these are the types of minor tweaks to the pension system that should be expected until lawmakers can devise a wholesale reform of the pension system that also conforms with the Illinois Constitution. Until that time, public pensions will remain a political hot topic that, if this Act works as intended, will capture the attention of the public along with local government leaders.