The Illinois Supreme Court blocked an attack on state employees
and their pensions when it upheld a lower court ruling on May 8, 2015. In
Pension Reform Litigation v. Pat Quinn, the Court struck down a 2013 law aimed
at slashing state-funded public employee pensions. The Court ruled the law
violated the Illinois State Constitution’s contracts clause.
In 1970, Illinois ratified an amendment to its constitution protecting
state-funded pensions. From 1970 until 2013, the funding for the state-funded pensions
stagnated, having only 41% of the funding necessary to meet the fund’s
liabilities. Conversely, the Illinois Municipal Retirement Fund is funded at
96%. The IMRF is not state funded.
To meet growing concerns with its state-funded pensions and other
budgetary issues, the Illinois state legislature passed Public Act 98-599. The
heart of PA 98-599 aimed to cut state-funded pensions. The bill sought to delay
eligibility for members. It also capped the maximum salary used to calculate
benefits. PA 98-599 then tried to effectively reduce base pension amounts for
some members. Senator Kwame Raoul, one of PA 98-599’s chief sponsors,
characterized the bill as sacrificing state employee pensions to protect state finances.
Former Governor Pat Quinn signed PA 98-599 in 2013. Five separate lawsuits
challenging the law’s validity were immediately filed. The lawsuits, all
decided in this case, claimed that PA 98-599 violated Illinois’s contracts
clause. Just like the California's contracts clause, the Illinois Constitution prohibits
the impairment of state pensions. PA 98-599’s proponents characterized the bill
as an exercise of the legislature’s emergency police powers. The Illinois
Supreme Court disagreed. The Court ruled that the PA 98-599 violates the
Illinois Constitution.
The Illinois Supreme Court warned against a slippery slope of unnecessarily
using police powers. Writing for the Court, Justice Lloyd Karmeier instructed
that emergency police powers must be reserved for true emergencies. If not, “no
rights or property would be safe from the State. Today it is nullification of
the right to retirement benefits. Tomorrow it could be renunciation of the duty
to repay State obligations. Eventually, investment capital could be seized.”
Justice Karmeier further explained that “crisis is not an excuse to abandon the
rule of law. It is a summons to defend it.” The Court pointed to the
possibility of raising taxes to meet the fund’s needs.
The Illinois pension victory represents just one battle in that state’s
fight. Though the ruling came from the Midwest, the fallout hits close to home. Just like Chuck Reed here in California, Governor Bruce Rauner wants to amend the Illinois constitution so that he can gut state-funded pensions.
Similar attacks on retiree benefits have failed in California on similar grounds. In Stockton, the superior court found a fiscal emergency declaration does not authorize City to renegotiate a closed labor contract. In Los Angeles, a court determined a fiscal emergency declaration does not permit freezing retiree medical benefits or imposing furloughs, and in Pacific Grove the court found a local ballot measure capping PERS pension contributions violated California's contracts clause. Mastagni Holstedt attorneys David E. Mastagni and Isaac S. Stevens represented the employee groups in Stockton and Los Angeles. Mastagni Holstedt attorney Jeffrey R. A. Edwards represented the employee groups in Pacific Grove.
Similar attacks on retiree benefits have failed in California on similar grounds. In Stockton, the superior court found a fiscal emergency declaration does not authorize City to renegotiate a closed labor contract. In Los Angeles, a court determined a fiscal emergency declaration does not permit freezing retiree medical benefits or imposing furloughs, and in Pacific Grove the court found a local ballot measure capping PERS pension contributions violated California's contracts clause. Mastagni Holstedt attorneys David E. Mastagni and Isaac S. Stevens represented the employee groups in Stockton and Los Angeles. Mastagni Holstedt attorney Jeffrey R. A. Edwards represented the employee groups in Pacific Grove.
