Illinois Supreme Court ruling could be omen for pension reform lawsuit

Illinois State Capitol
Illinois State Capitol

The Illinois Supreme Court ruled Thursday that the state cannot diminish or impair health insurance premium subsidies for retired state employees.

Government and union officials disagree about how the ruling, which says the subsidies are “a benefit of membership in a pension or retirement system” and as a result “are constitutionally protected from any diminishment or impairment,” will impact the state’s pending pension reform litigation, if at all. The law that enabled the state to charge retirees for insurance premiums was passed in 2012.

In March, the Illinois Supreme Court consolidated four lawsuits from employee and retiree organizations, which argued that the pension reform law passed in December violates the same constitutional clause that pension benefits “shall not be diminished or impaired.”

The pension reform law, aimed at saving $160 billion over the next 30 years, decreases cost-of-living adjustments, caps pensionable salaries and raises retirement ages, but actually decreases employee contributions by one percentage point. It also creates a defined contribution plan that will be made available for a portion of employees.

In May, a Sangamon County Circuit Court judge granted a temporary restraining order and preliminary injunction on the pension reforms law until the law’s constitutionality is decided.

“The (Illinois) Supreme Court ruled today that men and women who work to provide essential public services — protecting children from abuse, keeping criminals locked up, caring for the most vulnerable and more — can count on the Illinois Constitution to mean what it says,” said Henry Bayer, executive director of AFSCME Council 31, in a news release. “Retirement security, including affordable health care and a modest pension, cannot be revoked by politicians.”

Meanwhile, Maura Possley, spokeswoman for Attorney General Lisa Madigan, and Grant Klinzman, spokesman for Gov. Pat Quinn, remain confident that the state’s pension reform law is constitutional.

“While this decision is very clear on the fact that the pension clause covers health-care benefits, the arguments in the pension reform litigation are different than the ones in this health-care case,” Ms. Possley said. “As a result, this opinion has no direct impact on the pension reform litigation arguments. We will continue to vigorously defend the pension reform law.”

David Urbanek, spokesman for the $44.2 billion Illinois Teachers’ Retirement System, Springfield, and William R. Atwood, executive director of the $14.8 billion Illinois State Board of Investment, Chicago, declined to comment on Thursday’s ruling.

Neither William E. Mabe, executive director of the $18.3 billion Illinois State Universities Retirement System, Champaign, nor Timothy B. Blair, executive secretary of the $14.1 billion Illinois State Employees’ Retirement System, $600 million Illinois Judges’ Retirement System and $100 million Illinois General Assembly Retirement System, all in Springfield, could be reached for comment.

Barry Burr and Christine Williamson contributed to this story.