Update on Pension Reform
On July 3, the Illinois Supreme Court ruled that health care for retired state workers is a pension benefit protected by a state constitutional provision prohibiting the diminishment or impairment of those benefits. In Kanerva v. Weems the court held 6-to-1 that under the Illinois State Constitution's Pension Clause, any benefit of an Illinois retirement system "cannot be diminished or impaired," with no exceptions for health benefits.
The Kanerva case reverses the circuit court's dismissal of the challenges to the validity of the pension reform amendment to the State Employees Group Insurance Act. That amendment eliminated statutory standards for the State's contributions to health insurance premiums for members of three state retirement systems and instead requires the Director of Central Management Services to determine on an annual basis the amount of health insurance premiums that will be charged to the state and to retired public employees.
In her dissent, Justice Burke disagrees with the conclusion that the pension protection clause protects more than pensions. She also disagreed with the court's holding that there was no need to address the plaintiff's remaining claims in the Supreme Court, instead of only granting the relief sought to reverse the circuit court's dismissal.
Based on this ruling, a coalition of public labor unions is seeking an expedited ruling in consolidated lawsuits challenging the constitutionality of the new Illinois pension law. The state has not moved from its contention that its sovereign powers allow it to act in a fiscal emergency, but many observers say the July 3 decision was a "harbinger of doom" for the pension reform bill.
Supporters of the reform hold on to hope by stating that two important issues were not considered in the Kanerva ruling: first, that there is adequate consideration (trade-offs) in exchange for reducing benefits; and second, that the Legislature is granted broad powers in the case of emergencies.
The state has until October 3 to respond to plaintiff motions for summary judgment and two other motions. Based on the Kanerva ruling and the circuit court judge's indications, the pension reform lawsuit may be resolved as early as the end of this year.