Illinois Supreme Court Rules Pension Reform Law Unconstitutional

The Illinois Supreme Court on Friday unanimously ruled that the state’s pension reform law, enacted in 2013, violates the state constitution.

[Read the court’s full decision at the bottom of this post.]

It’s important to note that the ruling affects the state’s future finances, but doesn’t retroactively alter the state’s past finances (FY 2013-14 and FY 2014-15 budgets).

That’s because Illinois anticipated a legal challenge to the law, and didn’t budget the savings stemming from the reforms — a move that looks prudent now.

From the Chicago Tribune:

Republican Justice Robert Karmeier, writing for the entire court, said the law violated provisions of the 1970 Illinois Constitution known as the pension protection clause. The clause says public employee pensions are a contractual relationship with government and benefits cannot be diminished or impaired.

The December 2013 law called for curbing automatic and compounded annual cost-of-living increases for retirees, extending retirement ages for current state workers and limiting the amount of salary used to figure pension benefits.

Karmeier rejected arguments by the state that economic necessity forced curbing retirement benefits despite the constitution’s pension protections.

“Our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations,” Karmeier said.

But, he noted, “The law was clear that the promised benefits would therefore have to be paid and that the responsibility for providing the state’s share of the necessary funding fell squarely on the legislature’s shoulders.

“The 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,” Karmeier wrote.

The full decision can be read below.

Pension Decision

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