Illinois Pension Reform Law Ruled Unconstitutional


The state of Illinois will not be able to change pension benefits for its state workers, a Sagamon County Circuit Court judge ruled Friday.

Judge John Belz sided with government employee organizations that argued that the law violates the state’s constitutional clause that pension benefits “shall not be diminished or impaired.”

illinois state capitol

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A look at Illinois’ pension reform

The state passed a law on Dec. 3, 2013 that reduces pensioners cost-of-living adjustments, limits pensionable salaries, raises retirement ages while decreasing employee contributions by one percentage point, creates a defined contribution plan for a portion of employees and gives the five state retirement systems authority to sue the state to compel it to make required pension contributions.  The law was set to go into effect June 1, but was put on hold until the court ruled on its legality.

As near bankrupt state governments and municipalities across the country seek to grapple with paying their pension obligations without raising taxes, a key option is being taken away.  A Pensions and Investments report noted that the office of Gov. Pat Quinn and Attorney General Lisa Madigan argued that the pension law could have saved nearly $160 billion over the next 30 years. The state needs to close a $100 billion pension funding crisis that could be left for the new tough talking Republican Governor-elect, Bruce Rauner, who ran on a pledge to “shake up” state government. Rauner was a former private equity executive known for cutting costs to squeeze profitability out of troubled companies.

The state is expected to appeal the decision to the state Supreme Court.

“We welcomed the opportunity to make our case that the Illinois Constitution means what it says, and the pension clause is absolute,” Sean Smoot, attorney for one of the plaintiffs, We Are One Illinois, was quoted as saying in the report. “Our unions have long argued that the state cannot simply choose to violate the Constitution and diminish or impair retirement benefits if politicians find these commitments inconvenient to keep.”

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