Public Pension Reform at the State Supreme Court
The Illinois Supreme Court heard oral arguments March 11 on a public pension reform law passed in 2013 that would change how pensions for state employees are calculated and paid. The law would affect four state retirement systems: Teachers, Universities (including community colleges), State Employees and the General Assembly. Among other provisions, it included a reduction in annual cost-of-living adjustments on pension benefits and creation of an optional 401-K style savings plan. The issue came before the high court after a lower court ruling in November 2014 declaring the pension law unconstitutional. Judge John Belz ruled at the time the Illinois Constitution protects state pensions from reductions or diminishments. The state appealed to the Illinois Supreme Court.
On March 11, the Attorney General’s office argued the state’s police powers give it the authority to alter the pensions because of the state’s serious financial crisis. An attorney representing state employee unions told the Justices the pension protection clause in the state constitution protects employee pensions from any alterations resulting in reduced benefits.
It’s not a matter of argument about the condition of the state’s public pensions systems, considered to be the worst-funded of any state. The underfunded liability is estimated at $105 billion, which jeopardizes the integrity of the pensions. Attempts to correct the underfunding with catch-up payments also impose a burden on the state’s ability to pay for basic programs such as human services and public safety.
Supreme Court oral arguments lasted about an hour. Justices gave no indication when they would rule on the state’s appeal.