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Friday, May 8, 2015

Illinois Pension Reform Law Unconstitutional

The Illinois Supreme Court issued an opinion today finding the state's pension reform law unconstitutional.  In Re Pension Reform Litigation v. Pat Quinn, 2015 IL 118585.  We had written about the challenges to the legality of this law in previous posts, including this one,  

The Supreme Court's ruling is worth a read, especially for its historical analysis of the Illinois constitution's pension protection clause, and the decades-long (almost a full century) failure by the state to fund its state pension systems.  The Court's references to the debates on the pension reform bill are also interesting, as it sheds some light on the legislators' views of alternative methods for funding the state pensions.  

The Court considered the following three issues in finding the law unconstitutional.

First, the Court considered whether the law violated the pension protection clause of the Illinois constitution.  The Court noted that this issue was easily resolved.  The language of that clause states that public pensions are an "enforceable contractual relationship, the benefits of which shall not be diminished or impaired."  In the Court's view, the pension reform legislation clearly diminished the pension benefits by reducing retirement annuity benefits.

Second, the Court considered the state's argument that even if the law did violate the constitution, it could still be upheld as a proper exercise of the state's police power. The state made this argument as an "affirmative defense" to the challenge to the constitutionality of the law, arguing that state finances had become so dire, that the state legislature was "compelled" to override the constitutional protections for the "greater public good."  The Court rejected the state's arguments, finding that the economy is always subject to fluctuations, which the state should have taken into account and avoided had it adequately funded its pension funds. Moreover, the Court determined that there were less drastic measures available to deal with the pension crisis, including amortizing unfunded liabilities or raising taxes.  While the Court did not minimize the "gravity of the State's problems or the magnitude of the difficulty facing our elected representatives," it was bound to uphold the law.

Third, if portions of the law were held invalid, the Court considered whether these invalid provisions  (the annuity reduction provisions of the law) could be severed from the remainder of the statute. Although the statute did contain severability provisions, the Court found that severing the retirement annuity provisions from the remainder of the law was unworkable because those provisions were not only central to the law, but the "very reason for being." As a result, the Court concluded that the entire statute was void and unenforceable.

Post Authored by Julie Tappendorf  


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