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Pension Reform Act struck down

By Mark Fitton
Illinois News Network
Posted on 5/10/2015, 6:53 PM

SPRINGFIELD — The Illinois Supreme Court on Friday struck down as unconstitutional the Legislature"s 2013 attempt to rein in Illinois state pension costs.

The court was clear it believes the state"s 1970 pension protection clause means what it says:

"Membership in any pension or retirement system of the state … shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."

Justice Lloyd Karmeier, who delivered the unanimous opinion for the court, also said the financial crisis was largely of the state"s own making:

"The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and … it is a crisis for which the General Assembly itself is largely responsible."

The court rejected the idea that the state was attempting to alter pensions only as a last resort:

"Moreover, no possible claim can be made that no less drastic measures were available when balancing pension obligations."

The state, the judge wrote, could have considered a new schedule or "could also have sought additional tax revenue. While it did pass a temporary income tax increase, it allowed the increased rate to lapse to a lower rate even as pension funding was being debated and litigated."

The ruling sends Illinois farther down a financial rabbit hole.

Illinois" main pension systems are underfunded by $111 billion, and the state is having to set aside about $7 billion annually to keep the situation from growing worse.

In fact, Illinois is now paying more than 22 cents of each tax dollar to pension debt and that number is headed toward 30 cents. And that"s money that"s not going to education, infrastructure, public safety and other needs.

And complicating the picture is a projected $6 billion shortfall for the coming fiscal year.

The 2013 act would have reduced annual increases in retiree benefits, raised the retirement age for younger government workers and capped salary amounts for pension purposes.

One of the act"s drafters, Rep. Elaine Nekritz, said she was disappointed by the court"s ruling.

"Frankly my most overwhelming emotion is that I"m feeling sad because we are now going to be dealing with this problem in the state of Illinois for the next 40 to 50 years," Nekritz said.

A spokesman for Gov. Bruce Rauner released a statement saying, the "decision confirms that benefits earned cannot be reduced. That"s fair and right, and why the governor long maintained that SB 1 is unconstitutional."

The administration believes it"s time for "Constitutional Amendment clarifying the distinction between currently earned benefits and future benefits not yet earned, which would allow the state to move forward on common-sense pension reforms, should be part of any solution."

Senate President John Cullerton, D-Chicago, had expressed doubts about the constitutionality of the 2013 act.

On Friday, he said, "This ruling is a victory for retirees, public employees and everyone who respects the plain language of our Constitution.

"That victory, however, should be balanced against the grave financial realities we will continue to face without true reforms. If there are to be any lasting savings in pension reform, we must face this reality within the confines of the pension clause."

House Speaker Michael Madigan, D-Chicago, will review the court"s decision and consider it as lawmakers continue on the issue, a spokesman said.

House Republican Leader Jim Durkin said he respected the ruling but disagreed with it, and he is ready to work toward a solution.

Said Senate Republican Leader Christine Radogno, "I am committed to working with everyone to find a solution that adheres to the Constitution. We must work together in bipartisan cooperation with Governor Rauner."

Brad Cole, executive director of the Illinois Municipal League, said local governments — also bound by the court"s ruling — will have to look everywhere possible to get some relief and implore the General Assembly and the governor to stop passing unfunded mandates and pensions sweeteners.

But Illinois must find a way to address the pension problem, Cole said.

"There"s only one person who pays in Illinois for all of these issues, and that"s the taxpayer," he said. "They can only pay so much and they can only pay in so many different places. … We"ve got to doing something that"s going to provide some long term relief for the taxpayer."

Jim O"Donnell is a Park Ridge businessman and former Republican state Senate candidate. He said retirees deserve and the state needs a pension system that has certainty, is fair to taxpayers and is sustainable.

"I don"t believe existing one nor the former one former one meet any of those three criteria," he said.

"Illinois needs leadership and fiscally prudent decisions, and those decisions have not been made," he said. "There seem to be these myths that we can just raise taxes or we"ll get this money from the rich, and I just find those to be terribly unrealistic," he said.

Organized labor hailed the ruling and said it was thankful the court had "overturned this unfair and unconstitutional law and protected the hard-earned life savings of teachers, police, firefighters, nurses, caregivers and other public service workers and retirees," according to a statement from Michael T. Carrigan, president of the Illinois AFL-CIO.