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Education Funding

Illinois Pension-Law Overhaul Unconstitutional, State’s Supreme Court Rules

By Andrew Ujifusa — May 08, 2015 2 min read
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The Illinois Supreme Court ruled Friday that the state’s 2013 law designed to curb pension benefits for teachers and other public employees violated the provision of the state’s constitution that membership in a pension or retirement benefits system “shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Former Democratic Gov. Pat Quinn signed the law as a way to address unfunded pension liabilities. It was immediately challenged in court by a coalition of groups including teachers’ unions. I wrote about the law in April 2014 when discussing the Illinois gubernatorial election—Quinn was ousted last November by Republican Bruce Rauner. At the time, the unfunded pension liability for the state Teachers Retirement system stood at about $56 billion—as of last November, it stood at nearly $62 billion, out of total state unfunded liabilities of $111 billion.

Here are key changes in the law Quinn signed:

• A teacher who was 45 before June 1, 2014 would have been able to retire at age 55 and four months, after at least 20 years of teaching. A teacher who was 31 years old or younger on June 1, 2014, meanwhile, would have had to have been at least 60 with 20 years of service in order to retire.

• The law would have put a new cap on increases in cost-of-living adjustments, or COLAs;

• The law would have capped some workers’ pensionable salary;

• It also would have excluded most “pension matters” from being collectively bargained.

But the court ultimately ruled that these changes don’t square with the requirements of the state constitution.

“In ruling as we have today, we do not mean to minimize the gravity of the State’s problems or the magnitude of the difficulty facing our elected representatives. It is our obligation, however, just as it is theirs, to ensure that the law is followed,” Justice Lloyd Karmeier wrote in the Illinois Supreme Court’s opinion. “That is true at all times. It is especially important in times of crisis when, as this case demonstrates, even clear principles and long-standing precedent are threatened.”

Those opposed to the pension changes say that the fault lies not with overly generous benefit packages, but with the state’s failure to properly fund the pension system.

As the Chicago Sun-Times notes, Karmeier’s opinion specifically scolds state lawmakers for not keeping a 2011 tax increase in place as a way to shore up revenue for pensions. In striking down the changes to pensions, the state supreme court upheld a ruling from a Circuit Court judge issued last year.

It will be interesting to see how the court’s ruling impacts Rauner’s plan to overhaul pensions, which includes a shift to a 401(k) style retirement plan and a push to stop “pension spiking.” In his February budget proposal, Rauner said his pension plan would ultimately save taxpayers $100 billion over the next 30 years.

Read the state supreme court’s opinion below:

A version of this news article first appeared in the State EdWatch blog.