Illinois justices overturn state’s landmark 2013 pension law | WBEZ
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Illinois justices overturn state's landmark 2013 pension law

The Illinois Supreme Court has ruled that state lawmakers lack the constitutional authority to solve the state’s pension problems by reformatting -- and reducing -- retirement benefits of state workers in a law that was passed in 2013. The unanimous ruling means state legislators will have to return to the drawing board, under a new governor.

Illinois state lawmakers hoped to save the state more than $100 billion over the next several decades by raising the retirement age of workers and tying the cost-of-living increases retirees receive to inflation, rather than a set percentage, among other changes. But the court said the state constitution trumps their plan.

Friday’s ruling rejects the controversial, and much-debated, pension law that was approved and signed by then-Gov. Pat Quinn. The measure was passed as a way to eat away at the state’s $100 billion pension debt, which is considered to be so large that it puts the funding of basic functions of state government in jeopardy.

Attorneys for the State of Illinois, in defending the law, argued that the pension crisis gives the state police powers to enact the law. But, the Supreme Court said, in its decision, that the General Assembly cannot exercise a higher power than the state constitution itself.

“Crisis is not an excuse to abandon the rule of law. It is a summons to defend it,” Justice Lloyd Karmeier wrote in the decision.

Related: The politics behind the pension vote

In delivering the decision, justices handed labor unions a legal victory in their challenge of the pension law. Five separate challenges to the law were consolidated in the circuit court to expedite proceedings. The Supreme Court ultimately upheld the lower court’s decision.

Dan Montgomery heads the Illinois Federation of Teachers, a union representing suburban and downstate teachers. He said his members felt great joy and relief when they learned of the court’s decision--but that they’d always been confident that the Justices would rule in their favor.

“Can you imagine a state where when it’s not convenient anymore, to hold up constitutional obligations, the lawmakers just ignore them?” Montgomery said on WBEZ’s Afternoon Shift.

Still, he said some of his members were in tears waiting for the decision--he explained they were very afraid of losing their life savings.

“State pensions are still modest pensions that they paid for their whole careers,” Montgomery said. “They were afraid they were going to lose a significant chunk of 20, 25, 30 percent that bill would’ve cut their pensions by.”

The Justices also found that the pension protection clause from Illinois Constitution of 1970 was clear on the point. Their decision leaves questions about how lawmakers will next try to restructure the state’s pension systems and any impact it might have on local governments across Illinois that are working to reduce their own pension obligations. Including the City of Chicago, where last year lawmakers approved changes to two of Chicago’s underfunded pension systems. Those pensions were not included in Friday’s Supreme Court ruling, but the city’s adjustments argued for similar benefit changes. Teachers, police and fire pensions were not included in those changes but remain a pressing issue for the city.

The stakes

The State of Illinois owes more than $100 billion in pension debt. Much of which is the result of decades of the state skipping out on pension payments to pay for other services. Over the past few years, money from an increase in the statewide income tax rate was used to make some pension payments, but that tax rate dropped in January with the election of Republican Gov. Bruce Rauner, who has said the state’s taxes are too high. Meantime, bond rating agencies continue to watch the action around Illinois’ pensions, as they determine the state’s bond rating and its ability to borrow money.

What’s next

Reactions to the Supreme Court’s decision continue to come in. Here’s a compilation of some of what politicians and financial analysts make of what’s to come.

Michael Carrigan, Illinois AFL-CIO President:

“The Court’s ruling confirms that the Illinois Constitution ensures against the government’s unilateral diminishment or impairment of public pensions. Because most public employees aren’t eligible for Social Security, their modest pension—just $32,000 a year on average—is the primary source of retirement income for hundreds of thousands of Illinois families. While workers always paid their share, politicians caused the debt by failing to make adequate contributions to the pension funds.

Public service workers are helpers and problem solvers by trade. With the Supreme Court’s unanimous ruling, we urge lawmakers to join us in developing a fair and constitutional solution to pension funding, and we remain ready to work with anyone of good faith to do so.”

Democratic Senate President John Cullerton, who voted in favor of the pension law that has been struck down, but also advocated for a rival pension plan:

“From the beginning of our pension reform debates, I expressed concern about the constitutionality of the plan that we ultimately advanced as a test case for the court.  Today, the Illinois Supreme Court declared that regardless of political considerations or fiscal circumstances, state leaders cannot renege on pension obligations. 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. I stand ready to work with all parties to advance a real solution that adheres to the Illinois Constitution.” 

State Rep. Elaine Nekritz, D-Buffalo Grove, who was instrumental in developing and negotiating the pension law that was struck down:

“Our goal from the beginning of our work on pension reform has been to strike a very careful, very important balance between protecting the hard-earned investments of state workers and retirees and the equally important investments of all taxpayers in education, human and social services, health care and other vital state priorities. In its ruling today, the Supreme Court struck down not only the law but the core of that balance. Now our already dire pension problem will get that much worse and our options in striking that balance are limited. Our path forward from here is now much more difficult, and every direction will be more painful than the balance we struck in Senate Bill 1."

State Sen. Daniel Biss, D-Skokie, who also was instrumental in developing and negotiating the pension law:
"Today the Illinois Supreme Court ruled that Senate Bill 1 is unconstitutional. While this is not the opinion the authors of SB1 had hoped for, we must respect the Court and strictly adhere to this ruling. The Pension Clause of the Illinois Constitution provides important protections, and today's ruling proves the depth of those protections.

The state of Illinois and many of its local governments are still facing serious fiscal problems, including significant pension debt. I look forward to working with all parties to find ways to ensure that adequate resources are available to properly fund our pension systems, in the context of a responsible budget that funds crucial services. Our public employees, our government bodies and our taxpayers deserve nothing less."

State Sen. Daniel Biss, D-Skokie, who also was instrumental in developing and negotiating the pension law:
"Today the Illinois Supreme Court ruled that Senate Bill 1 is unconstitutional. While this is not the opinion the authors of SB1 had hoped for, we must respect the Court and strictly adhere to this ruling. The Pension Clause of the Illinois Constitution provides important protections, and today's ruling proves the depth of those protections.

The state of Illinois and many of its local governments are still facing serious fiscal problems, including significant pension debt. I look forward to working with all parties to find ways to ensure that adequate resources are available to properly fund our pension systems, in the context of a responsible budget that funds crucial services. Our public employees, our government bodies and our taxpayers deserve nothing less."

State Rep. Jim Durkin, R-Burr Ridge, who’s the House Republican Leader:
“I respect the Illinois Supreme Court, but disagree with the ruling.  I am prepared to continue working on meaningful legislative reforms to save our public pension systems.”

Gov. Bruce Rauner:
“The Supreme Court’s decision confirms that benefits earned cannot be reduced. That’s fair and right, and why the governor long maintained that SB 1 is unconstitutional. What is now clear is that a 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.”

Chicago Mayor Rahm Emanuel, who is also facing a big pension debt:
“Since taking office, our goal has been to find a solution to Chicago’s pension crisis that protects taxpayers while ensuring the retirements of our workers are preserved -- something we achieved with Chicago’s pension reform for the Municipal and Laborers funds.  That reform is not affected by today’s ruling, as we believe our plan fully complies with the State constitution because it fundamentally preserves and protects worker pensions rather than diminishing or impairing them.  While the State plan only reduced benefits, the City’s plan substantially increases City funding which will save both funds from certain insolvency within the next ten to fifteen years and ensure they are secured over the long-term.  Further, unlike the State plan, the City’s plan was the result of negotiation and partnership with 28 impacted unions to protect the retirements of the 61,000 city workers and retirees in these funds and ensure they will receive the pensions promised to them.”

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