Attorneys for state government are asking the Illinois Supreme Court to reinstate a controversial law curbing public employee pensions, contending that constitutional protections of retirement benefits are not absolute.
The arguments by Illinois Attorney General Lisa Madigan’s office, filed Monday, are the first in what is expected to be a lengthy back-and-forth with lawyers for public workers and retirees over the fate of the December 2013 law. Illinois’ worst-in-the-nation $105 billion unfunded public pension liability remains one of the most significant issues hovering over the state’s shaky finances under new Gov. Bruce Rauner.
In November, Sangamon County Circuit Judge John Belz struck down the law, which sought to erase the pension debt over 30 years by cutting annual cost-of-living increases, known as COLAs, to pensions and making employees work longer before collecting retirement benefits.
In his ruling, Belz determined that the pension clause of the state constitution preventing public retirement benefits from being “diminished or impaired” to be “absolute and without exception.”
But in their appeal to the state’s highest court, lawyers for the state argued that the government’s so-called emergency police powers — the ability to take action to ensure the functions of government — trump the protections of the pension clause.
State lawyers said the ability to fund necessary government services, as well as to continue paying out pensions, has been severely hampered by paying an increasing amount of the state’s checking account to fund the pension systems.
Illinois government worker pension system remains big issue for Rauner
Illinois government worker pension system remains big issue for Rauner
“According to the circuit court’s holding, for example, faced with an epidemic requiring the state to purchase and distribute vaccines or other costly medication, the state could not even temporarily reduce pension benefits to cover those costs,” lawyers for the state argued.
“Nor, in a period of prolonged deflation … could the state reduce pension benefits even if the corresponding rise in benefits caused by 3 percent annually compounded COLAs caused every dollar of state revenue to be spent on pension benefits,” the state filing said.
Public employee unions and retirees have fought the law based on the pension protection clause of the constitution and the failure of politicians over decades to pay the employer’s share of money into the state’s public pension systems.
In the latest legal filing, the state argued that the Great Recession “wreaked havoc with the state’s finances” and created $43 billion of the state’s unfunded pension liability.
It also argued that the increased COLAs during an era of low inflation had led to retirees getting $36 billion worth of “greater purchasing power,” while increased longevity has added an additional $9 billion in liabilities.
Attorneys for a coalition of public employee unions will file a response to the state’s arguments, and oral arguments before the court are scheduled for March.
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