Illinois Supreme Court strikes down state pension reform law, rejects state's police powers argument

By Jonathan Bilyk | May 8, 2015

While acknowledging the financial difficulties facing the state of Illinois and its local governments are “well known and significant,” the Illinois Supreme Court has declared there is no viable legal reasoning under the Illinois Constitution by which state lawmakers can in any way reduce the retirement benefits owed to state and local government workers.

Friday, May 8, the Illinois Supreme Court unanimously struck down as unconstitutional Illinois Public Act 98-599, the bipartisan public worker pension reform proposal enacted a year ago.

Supporters of the law had argued the reforms were needed to help the state grapple with severe financial problems, which they said have been caused in large part by the need to fund the state’s public worker pensions.

Opponents of the law, led by public worker unions, argued the state’s Constitution offered no space for the state to reduce its obligations, even in times of emergency, under the Constitution’s so-called diminishment and impairment clause.

The court, in an opinion authored by Justice Lloyd A. Karmeier, sided emphatically with the public workers. Chief Justice Rita B. Garman and justices Charles E. Freeman, Robert R. Thomas, Thomas L. Kilbride, Anne M. Burke and Mary Jane Theis concurred in the opinion.

“In ruling as 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,” the justices of the state high court said. “It is our obligation, however, just as it is theirs, to ensure that the law is followed. 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. Crisis is not an excuse to abandon the rule of law. It is a summons to defend it.”

The opinion comes about two months since justices heard arguments from lawyers for the state and from attorneys representing the public workers who are members of four of the five state public worker pension systems.

The public workers sued the state for violating the state Constitution almost immediately after the law was enacted on June 1, 2014.

The cases were consolidated in Sangamon County Circuit Court, and a circuit judge granted summary judgment in favor of the public workers, declaring the General Assembly and Illinois Gov. Pat Quinn had overstepped their bounds in enacting the reforms, which enabled the state to reduce annuities owed to state workers.

On appeal, the case moved immediately to the state Supreme Court, which heard the matter on an expedited schedule at the request of the state.

Friday, the justices upheld the lower court’s ruling.

Justices noted by the time the case had arrived before the high court, the state had all but conceded the law, under normal circumstances, would violate diminishment and impairment clause.

However, the state argued the law was not only necessary, but legal under its constitutional “reserved sovereign powers,” or so-called police powers which empower the state to act in times of crisis “in the interests of the greater public good.”

The state Supreme Court, however, said this argument did not hold up.

The justices rejected contentions the economic conditions facing the state amount to a public crisis great enough to allow it to trigger those police powers and override language in the state Constitution protecting public worker pensions.

The justices noted “economic conditions are cyclical” and the court has rejected other attempts “to reduce or eliminate expenditures protected by the Illinois Constitution” during past economic downturns.

The justices chided lawmakers for enacting the pension reform law, knowing it would likely fail to pass constitutional muster, when it could have opted for less “drastic” measures, such as raising taxes or adopting new schedules to amortize the state’s unfunded pension liabilities. They particularly noted the crisis alleged by lawmakers was caused by a historical pattern by lawmakers to choose to use the money which otherwise could have gone to deal with unfunded pension liabilities for other spending priorities.

“Public Act 98-599 was in no sense a last resort,” the justices wrote. “Rather, it was an expedient to break a political stalemate.”

Further, the justices questioned whether there was any space at all for the state to  invoke police powers to address public worker pensions. They noted the state Constitution subjects other so-called guaranteed rights, including the right habeas corpus, religious freedom, the right to keep and bear arms and the right to a “healthful environment,” to limitations under various exclusions and police powers.

“When it came time to address the rights conferred by membership in public pension systems, however, the drafters included no similar reservation of authority,” the justices wrote. “The decision was not inadvertent.”

The justices compared the rights conferred to public workers’ pensions to those conferred to judicial salaries, which the state Constitution forbids lawmakers from reducing while a judge is serving a term in office, “notwithstanding the state’s claims of economic hardship.”

However, justices said they do not believe declaring this right inviolable harms the state’s sovereignty, reasoning such sovereignty does not flow from the General Assembly, but rather originates with “the people.” And since the language is included in a constitution ratified by the people, the people have opted to so stridently limit the abilities of the state to reduce or amend the retirement benefits of public workers.

“Through this provision, the people of Illinois yielded none of their sovereign authority,” the justices wrote. “They simply withheld an important part of it from the legislature because they believed, based on historical experience, that when it came to retirement benefits for public employees, the legislature could not be trusted with more.”

Should the state be allowed to invoke police powers in this circumstance to violate the state Constitution’s expressed language, the justices worried there could be no end to the General Assembly’s use of the doctrine.

“Today it is nullification of the right to retirement benefits,” they wrote. “Tomorrow it could be renunciation of the duty to repay state obligations. Eventually, investment capital could be seized.

“Under the state’s reasoning, the only limit on the police power would be the scope of the emergency. The legislature could do whatever it felt it needed to do under the circumstances. And more than that, through its funding decisions, it could create the very emergency conditions used to justify its suspension of the rights conferred and protected by the Constitution.”

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