Illinois judge halts reforms until constitutionality determined


When Illinois lawmakers passed their landmark pension reform law in December, they marked their calendars for June 1, 2014.

That’s the date the law was supposed to go into effect, but lawmakers, unions and most citizens knew better—a myriad of legal challenges would surely push back the implementation of the reforms and pave the law’s path to the state Supreme Court.

Today, an Illinois judge confirmed that sentiment when he ordered a temporary restraining order on the law that will prevent it from taking effect on June 1. The ruling ensures that the law won’t go into effect until the legal battles over the law’s constitutionality are resolved.

The decision is a major victory for the group whose challenge catalyzed today’s judgment: We Are One Illinois, a coalition of retiree groups and unions.

From the Chicago Tribune:

The groups argued the law is unconstitutional because it scales back benefits and raises retirement ages. Under the Illinois Constitution, public employee pensions are a “contractual relationship” with benefits that cannot be “diminished or impaired.”

“This is an important first step in our efforts to overturn this unfair, unconstitutional law and to protect retirement security for working and retired Illinois families,” said Michael T. Carrigan, president of the Illinois AFL-CIO, the point man for the union coalition.

Judge John Belz recognized the retirees and others in the pension systems could suffer “irreparable harm” if the law is allowed to go forward while the constitutionality issues is still being fought out in the courts, according to his order. The case is expected to wind up in the Illinois Supreme Court.

The decision won’t affect Illinois’ budget; lawmakers anticipated the legal challenges against the reform law, and didn’t incorporate its projected effect into the budgets for fiscal year 2013 or fiscal year 2014, which begins July 1.


Photo Credit: SalFalko via Flickr Creative Commons License

CalPERS fires back against Detroit pension ruling

When a federal judge ruled today that Detroit could legally cut pensions as part of its bankruptcy proceedings, it was akin to putting a bullseye on the back of pension funds that had previously been heavily protected by constitutional and contract law.

It didn’t take long for the nation’s largest public pension fund to weigh in on the matter: California’s Public Employee Retirement System (CalPERS) has taken the unmistakably forceful stance that the Detroit ruling is not only misguided, but that it doesn’t affect their system at all.

From a CalPERS statement released just hours after the ruling:

“The Detroit court failed to recognize the difference between a two party contract and the unique nature of a state public employee retirement system…In California, our members’ vested rights to their pensions are protected by the California constitution, statutes and case law.”

The statement goes on to state why CalPERS is confident the ruling doesn’t apply to its system:

“Unlike Detroit, CalPERS is not a city pension plan. CalPERS is an arm of the state and was formed to carry out the state’s policy regarding public employees. The Bankruptcy Code is clear that a federal bankruptcy court may not interfere in the relationship between a state and its municipalities. The ruling in Detroit is not applicable to state public employee pension systems like CalPERS.”

Although Michigan’s ruling isn’t legally binding in California, the judge’s decision sets the precedent that cities in bankruptcy proceedings can “impair” pensions just as they can traditional contracts, constitutional provisions not withstanding.