Today's News & Commentary — March 25, 2016
The Illinois Supreme Court issued two rulings with mixed results for Chicago unions. First, Chicago city workers enjoyed a legal victory when the Court declared unconstitutional a 2014 law that required workers to contribute more toward their retirements while simultaneously reducing their pension benefits. The Illinois Constitution includes a “pension protection clause,” which guarantees the right to be paid and prohibits pension benefits from being “diminished or impaired.” The reduction in pension benefits violated that state constitutional guarantee. According to the New York Times, this ruling will “make it more difficult for city leaders to resolve a developing financial crisis exacerbated by their obligation to pay into pension funds.” Last year, the City Council increased property taxes by $589 million to fund police and firefighter pensions. After the ruling, another property tax increase for city residents may not be out of the question.
Alongside the pension decision came another ruling on back wages from the state’s high court. In this second decision, the Illinois Supreme Court held that five state agencies need not pay $53 million in back wages to 24,000 employees because the General Assembly did not appropriate sufficient funds for that expense. According to the Herald & Review, the executive director of the American Federation of State, County and Municipal Employees Council 31—which represented workers in both cases—called the back-pay ruling “disappointing”: The case was “about the integrity of state government – that when it enters into a contract, it must live up to its terms.”
The pair of rulings come as the Chicago Teachers Union, along with a dozen other unions and community groups, announced a one-day walkout on April 1, as repeated efforts to negotiate a new contract with the Chicago Public Schools (CPS) have failed. The Chicago Tribune reported that the Union and the CPS agreed on one point: that the state government must create a new funding plan for public schools. “We need funding from Springfield, we need Gov. Rauner to get off his anti-union ‘turnaround agenda’ and get a budget done,” said the President of the Union. Meanwhile, the CEO of the Public Schools warned that the walkout may give “Gov. Rauner more ammunition in his misguided attempt to bankrupt and take over Chicago Public Schools.” 300,000 children will be out of the classroom for two consecutive Fridays as a result of the impasse: The CPS had set today (Friday, Mar 25) as one of three furlough days to save cash. This forced unpaid vacation time was one of the issues that contributed to the walkout.
American Airlines agreed to offer an employee profit-sharing program on Wednesday. As a result, all four of the top U.S. carriers will now share profits with employees. According to the Wall Street Journal, American Airlines has long insisted that the best way to increase compensation was through defined increases in base pay. The carrier decided to change course, however, because it “heard from many [employees] that a profit-sharing plan is important to [its] success as a team.” American Airlines announced that it would share five percent of pretax profits with all but management employees. This rate is lower than those offered by competitor carriers, but a memo from American’s CEO revealed “plans to offer higher hourly pay rates than those same peers in contracts being negotiated now and in the future.” Last year, Southwest Airlines paid $620 million on $2.2 billion in profit, while United paid $698 million on $7.3 billion in profit.