November 25, 2014
Shortly after a Sangamon County Circuit Court Judge ruled that the pension reform law passed in Illinois almost a year ago violated the State constitution, Attorney General Lisa Madigan announced she will be seeking an immediate appeal of the decision to the State Supreme Court.
Judge John W. Belz issued the Circuit Court’s decision on Friday, November 21, 2014, one day after hearing oral arguments on the case. The short ruling concluded that the changes in Public Act 98-0599 to the benefits provided by the State retirement systems to current and future State retirees violated the pension protection clause of the Illinois Constitution. The decision included a determination that the different elements of the law were not severable so that the validity of the various reforms could not be judged individually.
The judge also rejected claims of any special sovereign police powers of the State to reduce benefits of retirees due to a fiscal emergency. The denial of this claim was not based on the argument for these powers presented by the Attorney General but rather a lack of judicial precedent to support the claim.
The Attorney General’s statement regarding the case urged the Supreme Court to expedite the appeals process so that the Governor and General Assembly have ample time to cope with the significant impact the case will have on the State’s fiscal condition.
As previously discussed here, the State’s total annual contribution will increase by $682 million to $7.5 billion in FY2016 from $6.9 billion in the current fiscal year (FY2015) based on the recent preliminary calculations from the State’s pension funds. It remains to be seen how the State will afford increasing payments over time under the current law to address the State’s unfunded pension liability, estimated to total $104.6 billion as of June 30, 2014, based on the market value of assets.
A report from the Commission on Government Forecasting and Accountability estimated that the changes from the pension reform law would immediately cut the State’s unfunded liability by $21.1 billion and reduce its annual contributions by $137.4 billion over the next 30 years.
However, the implementation of the law has been on hold since Judge Belz ordered a preliminary injunction in May 2014 while the case against the pension reforms proceeds through the courts. No savings were included in the FY2015 State budget from the pension reforms and the preliminary contribution estimates for FY2016 are based on the previous law.
It is uncertain how long the Illinois Supreme Court will take to answer the Attorney General’s appeal or when a final verdict could be reached.
In the Illinois court system, cases may be taken up directly from the Circuit Court by the Supreme Court, or appeals can proceed through one of the five Appellate Court Districts. According to Illinois Courts’ annual report, in 2013 the Circuit Courts received 3.1 million cases and 8,134 cases were filed with the Appellate Court. A total of 2,671 cases were filed with the Illinois State Supreme Court in 2013.