 In her appeal now before the Illinois Supreme Court, the attorney general says
the state, under extraordinary circumstances, has the power to modify contracts.
Central to her argument are police powers, also known as reserve sovereign
powers. The concept lets the state step outside normal contract law when its
actions are meant to ensure it can continue to provide for society’s health,
safety and welfare.
Resolution of the pension lawsuit will have a big impact on the state’s – and
taxpayers’ – finances.
The Legislature approved the pension overhaul in an attempt to tackle an
unfunded pension debt of more than $100 billion. Pension reform supporters say
the pension debt is economically strangling the state as its payments,
unchecked, will account for $1 of every $4 the state collects in general
revenue.
The 2013 pension act obligated the state to increase its payments to the pension
funds, but it also reduced cost-of-living allowances for retirees, which they
successfully argued diminished their pensions in violation of the state’s
constitution.
Rewriting law?
In her pleading before the Illinois Supreme Court, Madigan acknowledges the 1970
state constitution created a contractual right for government retirees.
So while she does not argue the state has a contract with retirees, the attorney
general does say the circuit court erred when it struck down the 2013 act.
She contends the court’s reading or application of the 1970 constitution’s
pension protection clause essentially creates “super contracts” and ignores the
states police or sovereign reserve powers.
If “the pension clause really bars the state’s exercise of its police powers
under every possible circumstance, no matter how dire the consequences, then the
contractual relationship the clause creates is unlike any other contractual
relationship ever recognized in American law,” she argues.
The attorney general contends history and precedent clearly allow for the use of
police powers in such a case and the trial court’s ruling is a “major and
unprecedented reformulation of the meaning of ‘contractual relationship.’”
Her legal opponents say, “Not so.”
They say the state-funded retirement systems are outside the reach of police
powers because that’s exactly what the framers of the 1970 Illinois Constitution
intended.
They cite the language of Article 13, Section 5:
“Membership in any pension or retirement system of the State, any unit of local
government or school district, or any agency or instrumentality thereof, shall
be an enforceable contractual relationship, the benefits of which shall not be
diminished or impaired.”
Said one attorney for the state retirees, “It was specifically written into the
Illinois Constitution out of fear that the state would be unable to meet its
pension obligations because it had refused to fully fund pensions in the past
and had been treating pensions as not contacts but as gratuities.”
Attorney Aaron Maduff continued, “The pension protection clause was added to the
constitution for the purpose of ensuring that wouldn’t happen. For the state to
come in and say, ‘We are going to invoke the reserve sovereign power, the police
powers,’ is contrary to what the clause was created for in the first place and
therefore, among other reasons, we don’t think the pension protection clause is
subject to a police powers argument.”
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|
 Edward Kionka practices appellate
law and is a professor emeritus at Southern Illinois University
School of Law. He argued on behalf of a group of retirees in a
similar 2014 case, Kanerva vs. Weems.
He says the reason for the pension protection clause
is clear, the language is plain and it does exactly what the framers
of the 1970 document and the voters that approved it wanted it to do
— protect public pensions from underfunding by government.
“If a self-created fiscal emergency is enough to override the
constitution, then the Illinois Constitution is meaningless,” Kionka
said.
The attorney general, whose father was one of the drafters of
constitution, sees it differently. She says a reversal of the trial
court’s decision would “preserve the longstanding balance between
contractual rights and the state’s sovereign duty to provide for the
general welfare that is at the heart of our constitutional
structure.”
Even should the state’s argument on police powers and the pension
clause not succeed, the attorney general argues the trial court
erred when it found the entire 2013 act unconstitutional. The state
wants the case returned to the trial to determine which parts of the
act can stand and which cannot.
What’s next?
Who or what created the funding crisis is somewhat in play. Madigan
makes a detailed argument that The Great Recession of 2007-2009 had
a devastating effect on state finances, including the state’s
pension funds.
Opponents contend the recession may have accelerated the crisis, but
say the cause was years of short-funding by Illinois legislatures
that simply diverted the money to other wants and needs.
Others say pension systems by their very nature are flawed and it is
impossible for an employer to guarantee payments under all
circumstances for the life of any given recipient.
Critics also contend the protection clause elevates state employees
pensions and rights above of those of everyday citizens and private
sector workers.
But it appears that the central question before the court is whether
the pension protection clause of the 1970 constitution is absolute
or is subject to limitation by police or reserved powers.
It doesn’t appear the case will be up for oral arguments before the
Illinois Supreme Court before March.
Maduff said the plaintiffs have until mid-February to respond to the
state’s pleading, and the attorney general’s office will have
another week after that to file a response. Presumably, the case
will be argued before the state high Supreme Court sometime in
March, he said.
The timing of a decision is not certain. While an Illinois Supreme
Court decision on a complex matter might normally take six months to
a year, the court has granted this case expedited status and the
state has asked for a ruling as soon as possible so it may proceed
on work for its next budget.
[This
article courtesy of
Watchdog.]
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