Supreme Court To Hear Arguments On Pension Law

The Illinois Supreme Court is scheduled to hear oral arguments Wednesday on the constitutionality of a new state law that would reduce retirement benefits for state employees. At stake is Illinois’ unpaid pension obligations, which have risen to above $100 billion, in addition to the pension benefits that individual state employees’ say that they’ve been promised through their years of work.

The lawsuits that were filed against the state come from labor unions representing a range of their members, from suburban and downstate teachers and employees of universities, to cashiers for the Secretary of State’s office and state prison correctional officers.

They say they’re protected by the state constitution from the cuts that were approved by a bipartisan mix of lawmakers and that was signed by then-Democratic Gov. Pat Quinn. Arguments at Wednesday’s Supreme Court hearing are likely to be a high level of legal discourse.

Here is a short breakdown of the issues presented so far.

The stakes

The State of Illinois owes more than $100 billion in pension debt. Money from an increase in the statewide income tax rate had been used to make some pension payments, but that tax rate dropped in January with the election of Gov. Bruce Rauner, who has said the state’s taxes are too high.

Many other local governments within Illinois are closely watching how the Supreme Court rules on the statewide pension question. State lawmakers granted the City of Chicago the ability to change retirement benefits for workers and laborers for the city. The city has stalled, changing the benefits to other pension funds.

Many of Chicago’s suburbs are also watching the Supreme Court’s ruling as they also look toward restructuring retirement benefits for their police officers, firefighters and other municipal employees.

The argument for the pension law

The Illinois Attorney General’s office has been defending the pension law in court. Attorneys there have argued that although the state pensions have been underfunded for years, the debt is now so large that it puts the government funding of schools, public healthcare and road construction at risk.

They argue fundamental functions of state government could not be funded without changes to pension benefits for state employees.

The Attorney General has also said that the pension costs are continuing to increase. For example, they say in court documents that in 1999, the pension fund for suburban and downstate teachers had nearly $11 billion in unfunded liabilities. By 2013, that debt had increased to $55.7 billion.

The argument against the pension law

Labor unions say the constitution is on their side because it says pension benefits “shall not be diminished or impaired.”

According to court filings, attorneys for the unions say the politicians running Illinois state government chose not to fully fund the pensions for decades, and now “the State expects the members of those systems to carry on their backs the burden of curing the state’s longstanding misconduct.”

Individual employees affected by these pension changes, from teachers to child protection investigators, listed their expected annual pension upon retirement, and have calculated an estimated amount of retirement income they’d lose if the law stands. Among some state employees, that number reaches the hundreds of thousands of dollars.

Previous court ruling on the pension law

The unions won round one in court. Sangamon County Judge John Belz said in a written opinion:

“The State of Illinois made a constitutionally protected promise to its employees concerning their pension benefits. Under established and uncontroverted Illinois law, the State of Illinois cannot break this promise.”

Attorneys were able to expedite the case to the state Supreme Court.