Illinois pension reform law challenges to be argued next month

Reuters News
Posted: Oct 08, 2014 9:11 PM

CHICAGO (Reuters) - Challenges to Illinois' pension reform law remained on track for a ruling by yearend after a judge on Wednesday ordered both sides back in court next month to argue their cases.

Sangamon County Circuit Court Judge John Belz, who is overseeing five consolidated lawsuits filed by labor unions and others, set Nov. 20 for arguments for and against the constitutionality of the law passed by the Illinois legislature last December.

Public labor union coalition We Are One Illinois and other parties have been seeking an expedited ruling in the wake of a July 3 Illinois Supreme Court decision in an unrelated case that determined health care for retired state workers is a pension benefit protected by a provision in the state constitution.

The same provision, which prohibits the impairment or diminishment of retirement benefits for public workers, is the focus of the lawsuits against the state's pension reform law. The new law, which is currently on hold, reduces and suspends cost-of-living increases for pensions, raises retirement ages and limits the salaries on which pensions are based.

In documents filed with the court on Friday, Illinois Attorney General Lisa Madigan argued that the high court's July 3 ruling only dealt with retiree health care subsidies being part of the contractual relationship Illinois has with members of the state's public pension systems.

"The court did not address whether such benefits are immune from the state's exercise of its police powers. That issue was not before the court," Madigan's court filing noted.

In its defense of the pension reform law, Illinois is leaning heavily on its so-called police powers trumping the constitutional provision against reducing public employee retirement benefits. Those powers include the state's ability to properly fund education, healthcare and public safety. Those sectors would experience substantial cuts if the state's already large pension burden grows, Madigan said in the filings.

"It is beyond reasonable dispute that all contractual benefits, including all benefits conferred by contracts with the government, are subject to the state's police-powers authority to enact laws necessary to protect the public welfare," the state claimed in the filings.

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Illinois has the worst-funded retirement system among states and its $100 billion unfunded pension liability has pounded its credit ratings to the lowest level among states.

The union coalition said the July ruling by the state supreme court, which will ultimately decide the pension reform dispute, "confirms the pension protection clause of the Illinois Constitution is absolute and without exception."

"We are hopeful for a swift resolution in the plaintiffs' favor, so that we can work with legislators willing to develop a fair and legal solution to our state's challenges together," the coalition said in a statement.

(Reporting by Karen Pierog; Editing by Lisa Shumaker)