Pension Reform Law Struck Down

Illinois has lost the first round in its attempt to uphold recently enacted changes to the state’s pension law. Sangamon County Court Judge John Belz has found that the pension reform law is unconstitutional and “void in its entirety.” Read the full ruling.

In his decision, Belz said the law violates the pension protection clause of the Illinois Constitution.

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Photo by Amanda Vinicky

“The defendants have attempted to create a factual record to the effect that, if a reserved sovereign power to diminish or impair pensions existed, the facts would justify an exercise of that power. The defendants can cite to no Illinois case that would allow this affirmative defense. Because the Court finds that no such power exists, it need not and does not reach the issue of whether the facts would justify the exercise of such a power if it existed, and the Court will not require the plaintiffs to respond to the defendants' evidentiary submissions. The plaintiffs having obtained complete relief, the Court also need not address at this time the plaintiffs' additional claims that the Act is unconstitutional or illegal on other grounds. See Kanerva, 2014 IL 115811, ~ 58. In summary, the State of Illinois made a constitutionally protected promise to its employees concerning their pension benefits. Under established and uncontroverted Illinois law, the State of Illinois cannot break this promise. Because the Act diminishes and impairs pension benefits and there is no legally cognizable affirmative defense, the Court must conclude that the Act violates the Pension Protection Clause of the Illinois Constitution. The Court holds that Public Act 98-0599 is unconstitutional.”

Illinois Attorney General Lisa Madigan said she plans to appeal the ruling to the Illinois Supreme Court immediately and ask the court to expedite the case. The case was initially brought in Sangamon County Court by the We Are One coalition of public employee unions, led by the American Federation of State, County, and Municipal Employees. Today, they celebrated the judge’s decision.

“This is a victory for every Illinois resident who believes in the integrity of the Constitution. It is a victory for a basic principle of fairness, that working people and retirees who earned modest pensions and always paid their share should not be punished for politicians’ failures. And it is a victory for the members of our unions, who work hard every day in every Illinois community to teach kids, protect public safety, care for the most vulnerable and much more. Today, they are more secure in the knowledge that their life savings can’t be taken away from them,” said We Are One statement.

But Gov. Pat Quinn spokesman Grant Klinzmann today expressed confidence that this ruling wouldn’t hold.

“We have always anticipated legal challenges to this critical law and urge the Illinois Supreme Court to take the matter up as soon as possible. This historic pension reform law eliminates the state’s unfunded liability and fully stabilizes the systems to ensure retirement security for employees who have faithfully contributed to them. We’re confident the Illinois Supreme Court will uphold this urgently-needed law that squarely addresses the most pressing fiscal crisis of our time.”

The pension reform law, passed last spring, attempted to solve the state’s $100 billion unfunded liability over the next 30 years, primarily by reducing retiree annual cost of living raises. The new formula for calculating yearly raises would cut pensioners who served the shortest time and earn the highest salaries the most, but would limit the cuts for those that have served the longest and earned less.

We Are One sought to make the case that the new law violated the pension protection clause of the Illinois Constitution, which considers a pension an enforceable contract, the benefits of which “cannot be diminished or impaired.”

In a recent news release, the We Are One coalition said, “The pension protection clause of the Illinois Constitution is absolute and without exception. There is no merit to the State's purported justification for the unconstitutional diminishments and impairments that Senate Bill 1 imposes.” 

But the state argued that it had emergency powers in a time of crisis that superseded that clause.

“The act represents a valid exercise of the state’s reserved sovereign powers to modify contracts and obligations,” Madigan said previously.

A recent state Supreme Court ruling, Kanerva v. Weems, held that state-subsidized health insurance for retirees was protected under the pension protection clause and could not be modified. Belz’ ruling today came on a motion for summary judgment as We Are One had asked for this case to be thrown out based upon the Kanerva v. Weems ruling. 

Governor-elect Bruce Rauner issued the following the statement:

“Today’s ruling is the first step in a process that should ultimately be decided by the Illinois Supreme Court. It is my hope that the court will take up the case and rule as soon as possible. I look forward to working with the legislature to craft and implement effective, bipartisan pension reform.”

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