Category: Budget & Appropriations

Arizona’s Teacher Strikes: The End or Just the Beginning?

July 19th, 2018 in Analysis, Budget & Appropriations, State Legislation

For six school days in late April and early May, teachers across the state of Arizona walked out of their classrooms to demand better pay, more classroom funding, and other concessions from governor Doug Ducey (R) and the Republican-controlled state legislature. These teachers, inspired by similar walk-outs in West Virginia, Oklahoma, and Kentucky, brought their “outside voices” together to call for change. In the early morning hours of May 3, Ducey signed the new state budget that gave teachers a raise. But, the bill fell short of meeting the walkout organizers’ other demands. Some have said the #RedforEd movement failed because it did not deliver on all of the group’s demands. Still, this strike was just the beginning.

It is important for me to be transparent about my personal connections to this issue. My mother is a life-long public school teacher, who recently retired after over 25 years of teaching in schools across Arizona. As part of Teach for America, I spent three years teaching in the Littleton Elementary School District, the same district where #RedforEd organizer Noah Karvelis teaches, although Mr. Karvelis started teaching after I left for law school. During my first two years of teaching, I earned my Master’s degree in secondary education from Arizona State University. And while I moved across the country to attend law school in Boston, I have kept in touch with many of my former colleagues in Arizona.

The issues with education funding in Arizona started in 2008, while the country was reeling from the recession. As states across the country scrambled to fix their budgets, Arizona’s schools took a big hit. Ten years later, while the economy has recovered, funding for Arizona’s schools didn’t. According to a report by the state’s auditor, schools were receiving less inflation-adjusted dollars per student in 2017 than they were in 2008. During that time, the state has seen its income limited by a number of tax cuts, the largest of which have gone to corporations. Despite promises, economic research has indicated that the cuts have not stimulated economic growth, resulting in decreasing government revenue. All this has translated into horrible conditions in many schools across the state.

The combination of the lowest teacher salaries in the country, low education funding, and successful walkouts in other states urged Arizona’s educators to take action. The group Arizona Educators United, which started the #RedforEd movement, laid out five demands: 20% raises for teaching & certified staff; pay raises for classified staff (janitors, paraprofessionals, secretaries, etc.); restoring classroom funding to 2008 levels; no new tax cuts until Arizona’s per-student funding reaches the national average, and annual raises for teachers until salaries reach the national average.

The movement’s hashtag, #RedforEd, started as a way to draw attention to the lack of education funding. Teachers began with “walk-ins” – they arranged to arrive at school early and stand just outside their school’s gates, wearing red shirts and waving signs. The walk-ins were aimed at building community support. Teachers also protested outside the capital during a “teach-in” on March 28 after the school day ended. The walk-ins continued for another month and, when the state legislature wasn’t receptive, the strikes began on Thursday, April 26.

Arizona State Capitol
Phoenix 1901

After nearly 13 hours of debate, Governor Ducey signed a new state budget that included nearly $273 million for teacher pay raises. That will only amount, however, to a 9% raise this year. Governor Ducey has plans to provide 5% raises in each of the next two years, in addition to the 1% raise teachers saw at the start of the last school year. But, this plan has a big problem. The legislature passes a new budget each year. So, while Ducey has “plans” to provide a 20% raise by 2020, that plan is completely out of his control because the decision ultimately lies with the legislature.

There are a number of other concerns that the teachers have with Ducey’s deal. The budget does nothing to raise per-pupil spending, increase pay to support staff, or reduce the state’s student-to-counselor ratio. While the American School Counselor Association recommends a ratio of 250 students per counselor, Arizona averages 924 students per counselor. A Democratic representative, Mitzi Epstein, had offered an amendment that would mandate a 250:1 student-to-counselor ratio, but the amendment failed.

While the budget itself certainly contained far less than #RedforEd supporters had hoped for, the fight is far from over. There are a number of ballot measures this November that could take Arizona’s education system in radically different directions. First, Proposition 305 asks voters whether they want to keep Senate Bill 1431 in place. That bill expanded what are formally called “Empowerment Scholarship Accounts” (“ESAs”) but more commonly known as school choice “vouchers.” While the two terms are not mere synonyms because they allocate money somewhat differently, the net result is that ESAs may be used by parents to send their child to private schools (including religiously affiliated schools). The money for ESAs is taken from public schools which, as stated, are grossly underfunded.

Organizers are also seeking petition signatures to place another initiative on the ballot related to education funding. The “#InvestInEd” ballot measure, which has not been given a number yet because it is not yet formally on the ballot, calls for tax increases on income over $250,000 for individuals or $500,000 for married couples. The web page in support of the ballot measure states that “[t]he higher rates are only paid on the income above those amounts.” Perhaps most importantly, funding secured through a ballot measure such as this one “cannot be taken away by the legislature.”

Finally, the #RedforEd movement has even driven some teachers to take more direct action. After spending nearly a week at the Capitol pleading with legislators to take action, several educators are running for elected positions themselves. The article by the Arizona Capitol Times identified former teachers running as both republicans and democrats for positions in the state house and senate, as well as local school boards.

The flurry of activity around education funding in Arizona makes a bold statement: this issue is not going away. While the strikes may be over and the new budget is signed, teachers have made clear that this will be a big issue come November. Beyond the ballot initiatives and teachers running for elected office, Governor Ducey is up for reelection. The #RedforEd movement unquestionably fell short of their goals – the last answer on the Arizona Educators United “FAQ” page makes that clear. But, to say that the movement died when the strikes ended is to underestimate the political will of angry teachers. Time will tell, but I think the movement for education improvement in Arizona is far from over.

David Bier anticipates graduating from Boston University School of Law in May, 2019.

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Finding Equity in Mental Health Reform

July 31st, 2017 in Analysis, Budget & Appropriations, Federal Legislation

Mental health has been a very serious topic in recent years, and one of growing concern in American society. Mental illness among teenagers continues to rise, and so do the costs of mental health treatment. Health care in general is a major and complicated issue in the United States, as Republicans in Congress found in their attempts to repeal and replace the Patient Protection and Affordable Care Act (“ACA”). In recent decades federal and state legislation have greatly improved access and provided needed consumer protections, but many of the most important protections are in jeopardy. If current Congressional action is any indication, mental health reform may take several steps backward under the new administration.

Mental health reform became a federal issue in 1996 when Congress passed the Mental Health Party Act (“MHP”). It was a weak first attempt at fixing persistent problems in the American health insurance market. Up until the passage of the MHP, insurance providers openly discriminated against mental health claims and treatment. The MHP was the federal government’s attempt to address the disparity between mental health coverage and traditional medical/physical health coverage. However, the original MPH was gutted in Congress before passage, leaving behind a weak law that barely fixed disparities and discrimination in mental health coverage.

galleryhip.com

galleryhip.com

During the congressional debates to get the MHP passed, many were concerned about the economic and practical costs of the initiatives to provide equal protections for mental health and medical care. However, the major success of the MHP was that it demonstrated to lawmakers that providing coverage for mental health treatments was not only beneficial, but that it could be done in a cost effective manner.

After the passage of the 1996 Act, the states responded and attempted to bridge some of the gaping holes left by the MHP. In many cases, states created stricter mental health parity laws than the federal government. This sparked a general acceptance and trend toward improving mental health parity. As opposition to mental health parity was drowned out by support for increased regulation and consumer protections, Congress felt encouraged to try their hand again at providing equal treatment for mental and medical health coverage. The 2008 Mental Health Parity and Addiction Equity Act (“MHPAEA”) was the result of Congress’s second try. The MHPAEA greatly expanded protections for mental health patients and treatment coverage. But alas, there were still major areas in need of reform.

Of particular importance to the current and future state of mental health reform though, came two short years after the passage of the MHPAEA - the ACA. Passed in 2010, the ACA combined with the MHPAEA brought sweeping reform for mental health coverage. Mental health coverage falls under the Essential Health Benefits mandate requiring every insurance provider to provide consumers with mental health coverage. Coupled with the MHPAEA, which requires any insurance provider to treat mental and medical claims equally, mental health coverage is now equal in the eyes of the law to medical coverage.

Since the passage of the ACA though, the practical impact of the reforms have resulted in more covert discrimination of mental health claims that are chipping away at important health care resources that are increasingly vital in American society. Despite laws requiring equal treatment, insurance providers decline mental health claims at higher rates than medical claims. Additionally, insurance providers also make it hard for mental health treatment providers to get paid thereby limiting the physical amount of help available.

The ACA made significant gains in mental health reform, however the lack of practical results has preserved mental health reform as a serious issue of concern. Recently, Congress enacted the 21st Century Cures Act (“Cures Act”), which addresses many pressing concerns that were not covered under the ACA. Most notably, the new act uses modern ideas to address mental illness concerns and substance abuse issues. However, a major concern with the Cures Act is that despite its passage, the House must choose to fund it. Otherwise, all the legislative action prescribed by the new federal law is moot.

Unfortunately, many are speculating that Congress and the Administration will be at odds over the budget putting federal funds for mental health in jeopardy. This is especially so given the fight over funds for various Republican and Presidential pet projects. For example, the President is strongly urging the Republican controlled Congress to allocate funding for his pet project, the border wall between the United States and Mexico. However, House Speaker Paul Ryan and many Republican representatives are more interested in changing funding allocations for health care in an attempt to bounce back after the humiliation of their previous attempt at altering the ACA.

If the recent efforts to "repeal and replace" the ACA was any indication of what the future holds for mental health reform, then America will take a step backward leaving millions without coverage thereby exacerbating an already growing problem. The House passed AHCA attempted to gut the ACA, and would have remove the individual mandate and significantly altered the Essential Health Benefits requirement. Under the AHCA, Ryan tried to remove the requirement that Medicaid and Medicare must follow the Essential Health Benefit mandate, which would effectively prevent millions of the most vulnerable in society from accessing affordable mental health resources.

The fate of mental health coverage and treatment access in many ways is tied to the continued success and longevity of the ACA and funding options for current mental health legislation. To remove the current federal mental health protections, as was proposed in the AHCA, would set progress back and make it nearly impossible for millions to have access to affordable mental health treatments. As the need for mental health treatments and resources grows, we as a nation should not be removing protections and federal funding for progressive initiatives. We should continue to follow the path of the Cures Act and further pursue these initiatives. In order for mental health treatment to be improved subsidies need to be provided for mental health treatment providers (such as psychologists) to incentivize them to open practices and facilities in critical shortage areas. Additionally, federal and state regulations need to address the manner in which insurance providers treat mental health providers.

The current legal framework as a whole is very fair, but needs stricter enforcement on the ground. What use are laws and protections if no one is incentivized to follow them? Of the greatest important, however, is that future laws and regulations intending to improve the state of mental health coverage need to stop attempting to create equality between mental health and medical treatment. Medical and surgical procedures are inherently different than mental health procedures and thus legal equity is needed in order to improve access and provide needed consumer protections.

1498837424-1Jessica Scarborough

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Is There Such a Thing as Free College?

July 31st, 2017 in Analysis, Budget & Appropriations, News, State Legislation

New York became the first state to make tuition free for two- and four-year colleges for certain students. Governor Andrew Cuomo first introduced his Excelsior Scholarship plan in January 2017, and signed it into law in April 2017. New York State’s Excelsior Scholarship will provide free tuition to students whose families earn less than $125,000 for all public two- and four-year colleges in New York, covering State University of New York (SUNY) colleges as well as City University of New York (CUNY) colleges. The estimated cost if this Excelsior Scholarship is $163 million, amounting to only 0.1% of New York State’s budget. Governor Cuomo, in announcing his plan, said “In this economy, you need a college education if you’re going to compete.” He explained, “It’s incredibly hard and getting harder to get a college education today. It’s incredibly expensive and debt is so high it’s like starting a race with an anchor tied to your leg.” Based on projections, around 940,000 New York households have college-aged children who would qualify for the program.free-education

“[T]he cost of attending college has risen at a much faster rate than the median income, putting even middle-class families in a tough spot when trying to figure out how to finance their children’s college education.” According to the Institute for College Access and Success, about 59% of students graduate from New York’s four-year colleges with debt, on average about amounting to $29,320 of debt. The program will work by giving a scholarship to students whose existing federal and state need-based loans do not fully cover the $6,470 list price tuition at public institutions. Students who currently pay no tuition out of pocket because they receive enough financial aid, through Pell Grants or New York Tuition Assistance grants, to cover tuition, will not receive any funding from the Excelsior Scholarship. This is problematic, as the Scholarship targets students from middle income families, instead of helping students from lower income families who struggle to pay for living expenses, books, and transportation even though they may not be paying out-of-pocket for tuition. Additionally, in order to be eligible for the Excelsior Scholarship students must enroll in 30 credits per year, therefore excluding part-time students.

Added to New York’s law at the last minute, just before it was signed, was a clause that turns the scholarship into a loan if the student leaves the state within four years of graduating (assuming they received four years worth of funding). This subsidy-turned-loan is problematic for many reasons. It both impedes the ability to work in the national labor market, as well as could incentivize unemployed graduates to stay in New York rather than leave the state to find a job elsewhere. Additionally, the converted subsidy-turned-loan would not have the same benefits as a federal student loan, like the income-based repayment arrangement.

Some of New York State’s public officials were not thrilled with the plan. New York State Assembly Republican Leader Brian Kolb stated “Governor Cuomo isn’t providing ‘free’ tuition, he’s simply telling New York taxpayers to write a bigger check.” Other Republican lawmakers criticized the Governor’s proposal during budget negotiations for excluding students at private colleges. Additionally, while SUNY Chairman Carl McCall and Chancellor Nancy Zimpher “applauded the budget deal” and called it “truly ground-breaking,” they also had “hoped for additional support,” specifically for SUNY community colleges.

With this program, New York joins other states and cities in providing free college. Tennessee, Oregon, and San Francisco have recently made tuition free at community colleges for all residents, regardless of income. Additionally, Rhode Island is now considering a proposal that would make two years at public colleges tuition-free. Unlike the Excelsior Scholarship in New York, the proposal in Rhode Island would allow every Rhode Island resident who graduates high school in-state to be eligible for two-years free tuition at the University of Rhode Island, Rhode Island College, and the Community College of Rhode Island, regardless of income. Interestingly, the Rhode Island proposal makes it so the scholarship could only be used for a students’ junior and senior years at four-year colleges. Projections from the Rhode Island Governor’s office expect that the program would benefit 8,000 students and cost $30 million a year, less than 0.5% of the state’s budget. The proposed plan, a “last dollar” scholarship, would “cover the gap a student has on their tuition bill after using up any federal or state grants he or she already receives.”

Additionally, college tuition has been a topic on the federal level. President Trump has proposed cutting $5 billion in higher-education for lower-income Americans. Senators Bernie Sanders and Elizabeth Warren, along with Representative Keith Ellison and other members of Congress, introduced the College for All Act, with the hope to eliminate tuition and fees at public four-year colleges and universities for students whose families make under $125,000 per year. The bill proposes that the federal government would pay 67% of tuition subsidies at public colleges and universities, and state and tribal governments would pay the other third. While the bill likely will not pass with a Republican Congress and Trump in the White House, it has been backed by the United States Students Association, the American Federation of Teachers, and the National Education Association.

While these college tuition subsidies could be extremely beneficial in allowing more students to attend college who previously could not afford it, there are many controversial issues in the scholarship plans. Who ends up paying for the scholarship? Does college truly prepare graduates for the workforce? And lastly, with all the strings-attached to New York State’s Excelsior Scholarship, can it be said that there is such a thing as free college?

1498837397-1Nicole Kesner

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With Obamacare in peril, the Governors Speak Out

July 27th, 2017 in Budget & Appropriations, Federal Legislation, News

Before the Affordable Care Act (ACA), I did not have health insurance. My home state Florida did not mandate health insurance coverage for residents and my undergraduate university did not require me to have health insurance. In essence, I was a typical American in my early 20s. I did not think I needed health insurance, was not required to carry it, and could not afford it. Cost was the greatest factor: I did not have any income and Florida did not expand Medicaid. To my surprise, the ACA allowed me to have affordable health insurance for the first time as an adult. Now Congress is contemplating major changes to the ACA (or commonly called Obamacare), causing some governors, such as Charlie Baker (R-Massachusetts), to weigh in on the proposals. Despite the recent successful House repeal and replacement of the ACA, the  Senate is now struggling to find a path forward under the budget reconciliation rules.

Just a few months ago, it looked as though changes to the ACA were inevitable given the unified Republican control of Congress and the Administration. Despite seven years of discussion of repeal, and more recently the repeal and replace vote, the future is still uncertain.  Members of Congress who attended  town hall meetings during the 4th of July break heard from many constituents who are deeply concerned with loss of coverage. Former House Speaker John Boehner recently said that Congress would not repeal and replace, but instead “fix” Obamacare.  And now, the Senate is spinning its wheels.

The much-awaited House bill, the American Healthcare Act (the “AHCA”), was the first attempt at replacing the ACA. The AHCA would repeal tax penalties for people without health insurance, reduce federal insurance standards, cut subsidies for buying private insurance and establish new limits on spending for Medicaid. In their first attempt, Republicans failed to get their bill to reach the House floor for a vote.  In spite of this defeat, the Trump Administration placed renewed pressure on Congress to revise the ACA. Ultimately, the House was able to pass the bill in its second try by adding $8 billion to help cover insurance costs for people with pre-existing conditions. However, the Senate cannot pass the House bill because Majority Leader McConnell must accommodate Republican senators from states that have expanded Medicaid under the ACA. These senators, with a statewide constituency, must consider what their state governors have to say on revisions to the ACA.aca-stethoscope-flag

Congress' ACA replacement process included a request to the 50 governors for information. In response, Massachusetts Governor Baker sent a letter on the ACA’s impact on Massachusetts. Some commentators believe Governor Baker’s letter could carry extra weight because of his Republican party affiliation and his past work experience as chief executive of Harvard Pilgrim Health Care gives his suggestions and concerns greater authority.

In his letter, Governor Baker discussed the importance of the health sector to the Massachusetts economy; $19.77 billion, making it one of the leading industries in the state. Governor Baker also noted that the ACA was modeled after the Massachusetts system, which was intended to provide close to universal coverage for residents. Massachusetts has the highest percentage of insured residents in the U.S.— 96.4%. Just under 60% of the insured are covered through the employer-sponsored insurance market.

Governor Baker argued that lawmakers should not repeal the ACA, but revise it. One area in need of repair is the ability of individuals with employer provided insurance to switch to tax-payer subsidized health insurance; something half a million Massachusetts residents have done since 2011. As a result, Medicaid now accounts for close to 40% of the state’s budget. Since 2012, the percentage of Massachusetts residents on commercial insurance decreased by 7% while Medicaid enrollment increased by 7% and now insures 28% of the population. The original Massachusetts program did not allow this transfer, but the State was forced to comply with the introduction of the ACA. Now, this particular aspect of the ACA was straining the Massachusetts system and needed to be revised. Although Governor Baker offered reforms, he argued for maintaining several aspects of the law, such as the mandate requiring all residents to carry health insurance, which would allow stability within high-risk pools for insuring people who are sick.

The Governor continues to push the goal of universal health care coverage, but recognized such a goal was in jeopardy because of certain Congressional proposals. For instance, the letter expressed concern over a shift to block grants for Medicaid funding to the states. The Governor argues that a shift to block grants (or “per capita caps for Medicaid) would “remove flexibility from states” as the result of lower federal funding. Under current law, the federal government and state governments share in the financing and administration of Medicaid. According to the Congressional Budget Office, states typically pay health care providers for services to enrollees, and the federal government reimburses states for a percentage of their expenditures. Furthermore, all federal reimbursement for medical services is “open-ended” in other words, if a state spends more because enrollment increases or costs per enrollee rise, additional the federal government matches. Currently, Massachusetts is a 50/50 state, meaning that the federal government and Massachusetts divide the cost of providing health care for Medicaid recipients.

Despite Governor Baker position, the House passed AHCA creates a per capita-based cap on Medicaid payments for medical assistance. The per-capita caps would establish a limit on the amount of reimbursement the federal government provides to states.  For instance, if a state spent more than the federally established limit on reimbursements, the federal government would not match the additional costs.  The AHCA would punish Massachusetts low income residents and threaten the stability of the MassHealth system.  Consequently, the changes to federal grants of funds could impact the Commonwealth’s goal of universal healthcare.

Today, Governor Bakerjoined with nine other governors, including Gov. Sandoval (R-Nevada) and Gov. Kasich (R-Ohio) —sent another letter to the Senate urging it to correct the ACA's weaknesses without repealing the law or gutting Medicaid.  The Governors wrote, "lasting reforms can only be achieved in an open, bipartisan fashion." The governors also called on the Senate to heed U.S. Sen. John McCain's, R-Arizona, impassioned plea to return to "regular order" and not continue the recent practice of hyper partisanship.

The governors are speaking; the question remains whether Congress is listening.

 

1498837424Juan Garay graduated from Boston University School of Law in 2017.

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Planned Parenthood’s Terrible, Horrible, No-Good, Very Bad Year

September 9th, 2016 in Budget & Appropriations, Federal Legislation, Opinion

The past 12 months was not the best of years for Planned Parenthood. In July 2015, a video surfaced of a Planned Parenthood employee discussing prices on harvested tissues from fetuses aborted by clinic patients. Planned Parenthood and other health care providers regularly act as a middleman - obtaining fetus tissue from consenting women and ensuring it safely reaches the proper research facilities. For this, the providers are usually reimbursed by research facilities for the costs of the process, but are not legally allowed to profit from the service.

Instantly the video caused an uproar within the GOP and prompted many political figures to point fingers at the organization for what it saw as illegal, greedy and immoral practices. Prominent Republican legislators, such as Ted Cruz, demanded that the organization be immediately stripped of over 500 million dollars in annual federal funding. During the Republican nomination process, Presidential hopefuls like Carly Fiorini used precious debate time to make wild accusations about the contents of the video and wilder claims that the “vast majority of Americans” support defunding Planned Parenthood.

Despite this misinformation, Planned Parenthood faced even more trouble when Congress took up the issue of the federal budget in September. The early fall saw Congress in a heated showdown, with Republicans fighting tooth and nail to attach an amendment to the budget that would defund Planned Parenthood as punishment for its “illegal” actions. On September 18, 2015, House Republicans were able to win the vote to defund the health care provider for one year. As the October 1st deadline to pass a federal budget approached, it was important that arguments over this bill not cause a repeat of the government shutdown of 2013. Fortunately, Senate Democrats worked hard to filibuster the amendment and the legislation failed to pass.plannedparenthoodabortion_072815fr-6

This small relief was short-lived however, as the organization faced a violent shooting at a Colorado branch in late November. The shooting has even caused some to speculate that the recent media scrutiny and criticism of the organization may have played a role in the attacker’s motivation to commit the act in the first place. Many of the conservative politicians lambasting Planned Parenthood seem to be attempting to ride the anti-abortion movement, claiming the organization provides solely abortion services in this country. To the contrary, the abortion services provided by Planned Parenthood accounted for only 3% of its services in 2013. And federal funding for abortion is restricted to cases of rape, incest or endangerment to the life of the mother by the Hyde Amendment.

Despite this, Senate Republicans passed the bill recently defunding Planned Parenthood and repealing parts of the Affordable Care Act. To do this, they relied on the Congressional reconciliation process, which only requires 51 votes to pass legislation. The bill passed 52-48.These votes are largely symbolic “political posturing” though, as President Obama has promised to veto any bill that touches the ACA or Planned Parenthood in any negative way.

Although the organization has faced a tough year, it has mobilized many supporters’ nationally, whether in person or through Facebook profile picture filters. The presidential election is bringing the debate into stark relief, with obvious pro-life and pro-choice platforms on either side. Trump has said that he plans to defund Planned Parenthood if they continue to perform abortions, although he actually supports the other services the organization provides. His choice in Mike Pence as a running mate speaks volumes as well. Pence has been working diligently since 2007 to defund Planned Parenthood, with some minor success. As the governor of Indiana, he has severely cut state funding to the organization. On the other hand, the 2016 Democratic National Convention hosted Planned Parenthood’s president Cecile Richards. Richards was clear in her speech when stating, "Make no mistake: women's health and rights are on the line and on the ballot in this election.”

Hopefully the next 12 months will bring better tidings for an organization that aims (and is known) to provide affordable and essential health care services to thousands upon thousands of men, women, and children in low-income families in America – people who otherwise would not be able to receive proper health care at all.  The presidential elections could be a death toll or a saving grace for an organization on the precipice. Come November, the future of Planned Parenthood will be more certain. Until then, the organization holds its breath.

Soni picSonam Bhagat  is from Lowell, Massachusetts and graduated from Boston College in 2011, concentrating in Finance and Accounting. Sonam is expected to matriculate from Boston University School of Law in 2017. Sonam will be working for a large corporate law firm in the summer of 2016 and hopes to explore various areas of law, in order to better decide her course after graduation.

Unconstitutional Budget Cuts – the Illinois Pension Controversy

July 10th, 2015 in Analysis, Budget & Appropriations, Legislation in Court, State Legislation

Across the country, state governments are facing financial crises and seeking to devise effective ways of saving costs. In Illinois, lawmakers have recently found themselves in conflict with the Illinois Supreme Court over a 2013 budget-related pension reform law. On May 8, 2015, the Court found the law unconstitutional, compelling legislators to go back to the drawing board and find alternative means of balancing the budget.

Illinois State Capitol Springfield 1868

Illinois State Capitol
Springfield 1868

With the aim to reduce expenditures, the 2012-2013 Legislature passed  “An act concerning public employee benefits,” meant to address “atypically large debts and structural budgetary imbalances” and an extremely low—and potentially falling— credit rating.  Also, the state’s public pension system was considered the most underfunded of any in the United States. The General Assembly expressed hope that the Act would “lead to fiscal stability for the State and its pension systems.”  The key provisions of the Act were:

1) terminate automatic, compounded annual cost-of-living increases for retired persons;

2) increase the retirement age for current public employees; and

3) reduce the salary amount that can be used for the calculation of pension benefits.

The Illinois State Constitution, however, includes specific pension provisions for public employees; Article 13, Section 5 describes the pensions in Illinois as a binding contract "which shall not be diminished or impaired.”

Various employee groups, retirees, and unions challenged the Act by asserting their constitutional rights. The Illinois Retired Teachers Association sued first in December, 2013, with a labor coalition named We Are One joining in the litigation a month later. The labor coalition boasted over 621,000 members, including: the Service Employees International Union (SEIU) Local 73, the Illinois AFL-CIO, the Illinois Federation of Teachers, the Illinois Nurses Association, the Illinois Police Benevolent and Protective Association, the Associated Fire Fighters of Illinois, and others. The We Are One complaint asserted that the Act violated the Illinois Constitution’s Pensions Clause and resulted in "an unconstitutional diminishment and impairment of the pension amount a member receives,” as well as violations of the Constitution’s Contracts Clause and Takings Clause.

After the Illinois Circuit Court found the pension law to be unconstitutional, the State appealed to the Illinois Supreme Court. Several amicus curae, including those submitted by professors specializing in constitutional and contract law, social service providers and the City of Chicago, supported the law and argued in favor of its legitimacy. Like the state, they argued the state’s sovereign police power enabled it to reduce the pension benefits as a way of addressing the current budget emergency.

The Illinois Supreme Court, however, unanimously voted to strike down the pension reform law. The court found that the Act violated the Pension Clause despite the financial difficulty placed upon the state with the public pension program:

“For as long as there have been public pension systems in Illinois, there has been tension between the government’s responsibility for funding those systems, on the one hand, and the costs of supporting governmental programs and providing governmental services, on the other.” Nevertheless, the court firmly concluded that the law was unconstitutional, writing that “there is simply no way that the annuity reduction provisions in Public Act 98-599 can be reconciled with the rights and protections established by the people of Illinois when they ratified the Illinois Constitution of 1970 and its pension protection clause.”

The court was also unconvinced by the State’s primary affirmative defense – that the pension reform law was a valid exercise of the State’s police power in a state of emergency.  Citing the cyclical nature of the economy, the Court asserted that the State has faced fiscal struggle before and cannot lower or terminate expenditures that the Illinois Constitution protects. As one potential alternative, lawmakers have submitted legislation to confront the state debt by amending the Illinois Municipal Code. This law would allow cities in Illinois to file Chapter 9 bankruptcy petitions under the national Bankruptcy Code.

The Illinois pension reform controversy may hold an important lesson for other legislatures struggling to balance the budget, especially since six other states have constitutional protections for public pensions. If the Illinois Supreme Court’s decision is any indication of how other state courts might react, legislators would be advised to keep state constitutionality in mind when developing budget-related bills; the judiciary will likely not be receptive to economic arguments when used as justification for violating an unambiguous constitutional clause. Facing such provisions, lawmakers may ultimately be drawn to amending the state constitution as a strategy, which Illinois Governor Rauner reportedly plans to pursue in the next year.

1436458928-3Chloe Noonan is from Monterey, California and graduated from Sarah Lawrence College with concentrations in Modern Languages and International Studies. She anticipates graduating from Boston University School of Law with a Juris Doctor in Spring 2016. During Summer 2015, Chloe will intern at the Lawyers’ Committee for Better Housing in Chicago, Illinois, where she plans to focus on affordable housing preservation and eviction defense for low-income tenants.