‘Police Powers’ Permit Pension Cuts: Illinois AG

By Nevin Adams • January 14, 2015 • 0 Comments
Illinois Attorney General Lisa Madigan (D) is arguing that the Land of Lincoln has “police powers” that allow it to change a contract in extraordinary circumstances, including changes to the state’s public pensions contained in a 2013 pension overhaul.

Madigan is appealing a lower court ruling that found the 2013 law unconstitutional. She filed an opening brief to the Illinois Supreme Court on Jan. 12, according to the Associated Press, which notes that several groups have filed briefs supporting the state's arguments, including the city of Chicago, the Illinois Municipal League and Chicago Public Schools.

Lawmakers approved the overhaul to address what’s become a $111 billion pension shortfall. The law attempted to reduce the gap in a variety of ways, including reducing cost-of-living increases for retirees and raising the age at which state workers can retire with full pensions. That seemed to run afoul of an Illinois constitutional provision that said state pensions were a contract right that can't be “diminished or impaired,” an argument made by labor unions and retirees who challenged the law. In considering that challenge, Illinois Circuit Court Judge John Belz on Nov. 21, 2014 rejected the law as unconstitutional, noting in a six-page opinion that “Any attempt to diminish or impair pension rights is unconstitutional.”

In her brief to the state’s high court, Madigan argues that without the law, the state's annual pension payment could take up one-fourth of its revenue.

However, the state Supreme Court's ruling in Kanerva vs. Weems last summer, which considered whether retiree health care benefits can be reduced, held that the state constitution's pension protection clause is “aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.”