Illinois pension reform law is unconstitutional, judge rules

A ruling Friday by an Illinois judge that a law intended to fix the state’s mounting pension crisis is unconstitutional paves the way for a legal showdown before the Illinois Supreme Court.

Sangamon County Circuit Judge John Belz ruled in favor of state employees and retirees who sued to block the state’s landmark pension overhaul.

In his ruling, Belz found that the “protection against the diminishment or impairment of pension benefits is absolute and without exception.”

“The Act without question diminishes and impairs the benefits of membership in State retirement systems,” Belz wrote in the ruling, finding the state had no legally valid argument.

Soon after the ruling was issued Friday, Illinois Attorney General Lisa Madigan said she would appeal and ask the Illinois Supreme Court to rule on an expedited basis. Gov.-elect Bruce Rauner, who inherits the state’s pension mess, said in a statement he hopes the court will rule as soon as possible.

“I look forward to working with the legislature to craft and implement effective, bipartisan pension reform,” Rauner said.

The overhaul was approved by lawmakers and Democratic Gov. Pat Quinn last year. Years of underfunding has put the state’s pension systems roughly $111 billion short of what they need to cover benefits promised to employees and retirees.

The law reduces benefits for retirees but also reduces employee contributions. State employees argued that the Constitution prohibits reducing benefits or compensation.

If the decision is upheld by the Illinois Supreme Court, lawmakers will have to work together to come up with another plan.

A spokesman for Quinn expressed optimism Friday that the state supreme court would uphold the law.

“We’re confident the Illinois Supreme Court will uphold this urgently-needed law that squarely addresses the most pressing fiscal crisis of our time,” Quinn spokesman Grant Klinzman said.

Illinois Senate President John Cullerton, D-Chicago, who has long questioned the constitutionality of the pension reform law, said he believed there is a legal way to confront the state’s pension challenges.

“Today’s ruling confirms that, while the need for reform is urgent, the rule of law is absolute,” Cullerton said in a statement. “I remain committed to working with all parties to address our budget pressures and pension problems in a manner consistent with the Illinois Constitution.”

Labor leaders, meanwhile, hailed the ruling as a victory.

“This is a huge victory for teachers, nurses, firefighters and police and all the working people in the state,” Illinois Federation of Labor President Dan Montgomery said. “They did what they said they were going to do, rule it unconstitutional. These benefits are absolutely protected, and you can’t change it just because you want to. The court ruling was very definitive and clear.”

Ty Fahner, president of the Civic Committee of the Commercial Club of Chicago, said Friday that the non-partisan business leaders’ group is disappointed but not surprised by the ruling, and fears those least able to afford budget cuts will be hurt if the ruling is upheld.

“After two-and-a-half years of work on this (legislation), we all believed it was constitutional,” he said. The Civic Committee, whose members are CEOs of the state’s biggest employers, supported and helped orchestrate the pension reform legislation.

“If the Illinois Supreme Court — the only court that really counts in this (case) — finally decides the law is unconstitutional, it will create great hardship on all levels of the state’s citizens, especially those least able to care for their needs,” Fahner said.

Fahner said the state’s neediest would suffer because, if state employees are entitled to collect their pensions plus a 3 percent cost-of-living raise, it would mean $6 billion in spending cuts elsewhere.

“That money (would) come out of somebody else’s hide,” he said. “That’s the people who can least afford to take care of themselves…It would greatly impact education, public safety and the help needed by the elderly.”

The next step is up to the Illinois Supreme Court, who can even choose to not hear the case, according to John Colombo, law professor at the University of Illinois at Champaign.

“They could just allow Judge Belz’s ruling to stand. That’s certainly not out of the realm of possibility,” Colombo said.

Colombo said should the Illinois Supreme Court take the case on an expedited basis, it could still take up to six months from the briefing to the oral arguments, and ultimately an issued opinion.

“If they don’t want to do that, it could take a year. If they just wanted to follow the normal briefing cycle and normal process,” Colombo said.

The court has previously indicated it takes the state’s obligations to its retirees seriously.

In July, the court sided 6-to-1 with retired state employees who argued health insurance premiums are a protected retirement benefit.

While state lawmakers might like some guidance from the court on what would pass muster, if the current law doesn’t, it’s up to the court.

Contributing: AP

Pension ruling