Illinois Supreme Court kills 2013 pension reform

Kevin Mathew, Copy Chief

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The Illinois Supreme Court ruled unanimously on Friday that pension reductions passed in 2013 were unconstitutional.

The decision struck down the most recent attempt to address a $111 billion pension shortfall and spells trouble for Gov. Bruce Rauner’s plans for further reform. Rauner will now seek a constitutional amendment to help fix the $6.2 billion deficit in next year’s budget.

The defense said the reductions were justified as extraordinary measures in an Illinois financial emergency, an argument rejected by the court which said legislators tried to override the state constitution when they reduced promised benefits. Illinois has the worst funded pension system in the nation, and, as the May 31 budget deadline approaches, local and state officials said they are now even more uncertain on how to move next.

The Civic Federation, a non-partisan research organization that evaluates Illinois fiscal policies, criticized Rauner’s 2016 proposal on Thursday, saying it overestimated savings from collective bargaining, Medicaid changes, mental health cuts and a 50 percent cut in income tax revenue for local governments. But the lion’s share, it said, came from expected savings of $2.2 billion from pension reform, savings Illinois courts will not green-light. The federation told The Daily it is waiting to review the full court opinion before commenting on the decision.

“While the Governor’s recommendations may close the budget gap on paper, the Civic Federation cannot support spending reductions that are either unrealistic or inconsistent with reasonable long-term financial goals for the State,” President Laurence Msall said in the Thursday news release. “Members of the Illinois General Assembly need to come forward now with their own plans for how to address a revenue shortfall in FY2016 that will be larger and more painful than what we experienced this year.”

The governor’s plans for reform are distinct from the 2013 reductions, and his response to the decision calls for a constitutional amendment which would clarify benefits currently earned against benefits expected to be earned.

“The Supreme Court’s decision confirms that benefits earned cannot be reduced,” Rauner spokesman Lance Trover said in a release. “That’s fair and right, and why the governor long maintained that (the reform) is unconstitutional.”

Credit-rating agency Moody’s, which ranked the Illinois pension system last in the nation in September, said in a statement the decision “provides additional evidence” pension cuts will not stick in Illinois. On May 1, Moody’s released a report that next year’s Chicago pension costs will increase by 15 percent of the city’s operating revenue from 2013.

“One outcome is certain: Chicago’s unfunded pension liabilities and ongoing pension costs will grow significantly, forcing city officials to make difficult decisions for years to come,” Moody’s said in a statement.

State Sen. Daniel Biss (D-Evanston) co-sponsored the 2013 pension reduction bill and said in a news release that the decision must be respected as it demonstrated important protections for pensions in Illinois.

“I look forward to working with all parties to find ways to ensure that adequate resources are available to properly fund our pension systems in the context of a responsible budget that funds crucial services,” he said in the release.

The Evanston city manager’s office said it is not taking a stance until it has heard from state officials. The Northwest Municipal Conference, which represents Evanston and 43 other nearby municipalities, has not taken a position yet and will discuss the decision Wednesday, deputy director Larry Bury said. The Evanston mayor’s office could not be reached for comment.

Email: kevinmathew2015@u.northwestern.edu
Twitter: @kevinwmathew

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