Illinois Pension Reform Unconstitutional
On May 8, the Illinois Supreme Court ruled the pension reform enacted in late 2013 unconstitutional. In In re Pension Reform Litigation v. Quinn, the Court upheld a circuit court ruling that deemed the act to be unconstitutional in its entirety as a violation of the pension protection clause, which states:
“Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not bediminished or impaired.” Ill. Const. 1970, art. XIII, § 5.
Justice Karmeier wrote, “[t]he 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.” In the end, the Supreme Court appeared to be signaling to the General Assembly that they would need to find new revenue streams to handle this problem, not pass limitations on the current pension benefits.
This news has brought out concerns on both sides of the issue. Governor Bruce Rauner, who was elected in November 2014, previously stated that he believed the law was unconstitutional and that this ruling “only reinforces his approach of getting voters to approve a constitutional amendment that ‘would allow the state to move forward on common-sense pension reforms.'”
However, Illinois AFL-CIO President Carrigan said in a prepared statements that “[w]e are thankful that the Supreme Court has unanimously upheld the will of the people, overturned this unfair and unconstitutional law, and protected the hard-earned life savings of teachers, police, fire fighters, nurses, caregivers and other public service workers and retirees.”
Nevertheless, Illinois had an unfunded pension liability of over $100 billion dollars in 2014 according to the Illinois Commission on Government Forecasting and Accountability. Additionally, Moody’s has downgraded Chicago’s bond rating based on the continuing growth of its unfunded pension and the lack of pension reform. Moody’s said the court decision was key to its downgrade because the city has been hoping to reduce cost-of-living adjustments, which typically raise the cost of pensions by close to 50%.