Circuit Court Strikes Down Pension Reform
In a widely publicized decision, Judge Belz of the Circuit Court of Sangamon County ruled on November 21, 2014 that the sweeping pension reform measures enacted in December 2013 violate the Illinois Constitution’s Pension Protection Clause. The decision sets the stage for an appeal to the Illinois Supreme Court that will have significant consequences for both the State of Illinois and participants in four of the State’s pension systems.
Last December, the General Assembly passed and Governor Quinn signed into law Public Act 98-0599. As we explained at the time, the legislature passed sweeping reforms that included a variety of benefit reductions for both active Tier I members currently accruing benefits and retirees currently in pay status. Retirees and labor unions challenged the law, arguing that the Act’s benefit cuts for current members and retirees diminished and impaired the benefits of membership in each pension system in violation of the Article XIII, § 5 “Pension Clause” of the Illinois Constitution.
The Court on Friday agreed, and held the Act unconstitutional. According to the Court, Illinois courts have “consistently held over time that the Illinois Pension Clause’s protection against the diminishment or impairment of pension benefits is absolute and without exception.” The State argued that the collective unfunded liabilities of Illinois’s pension systems constitute an ongoing crisis, and the State was acting within its reserved sovereign or police powers. The Court was not persuaded, and held the Pension Clause “contains no exception, restriction or limitation” for an exercise of Illinois’s police power. Therefore, the Court held that the Act in its entirety is unconstitutional.
An immediate appeal to the Illinois Supreme Court is expected. Shortly after the ruling, Governor Quinn expressed confidence that the Supreme Court would ultimately find the law constitutional. Governor-elect Rauner expressed hope that the Supreme Court would take up the case “and rule as soon as possible.” We will provide updates to keep you informed as events unfold.