SPRINGFIELD, Ill. – Illinois Supreme Court justices asked the state’s lawyer to explain Wednesday how the government can seek extraordinary power to reduce public pension benefits in the face of a fiscal crisis when the government itself is culpable for the financial mess.
Justice Robert Thomas peppered solicitor general Carolyn Shapiro during oral arguments over the constitutionality of a 2013 law that cuts retirement benefits in a 30-year plan to slay a $111 billion deficit.
State employees and retirees challenged it, arguing that the state constitution prohibits action to “impair or diminish” the benefits of the contractual pension agreement.
The state counters that it can resort to “police powers” to trump the constitution in moments of economic peril. The peril, they say, can largely be traced to the recession of 2008, which battered the value of the pensions’ portfolios and caused other problems.
But until questioned about it, Shapiro didn’t mention that for decades, governors and legislators have given short-shrift to annual contribution obligations — including as recently as 10 years ago, well after the crisis was widely recognized, by skipping $2.3 billion in payments.
“If the court holds that the state can invoke its police powers to violate core constitutional guarantees to respond to an emergency that at least arguably the state itself created, then aren’t we giving the state the power to modify its contractual obligations whenever it wants?” Thomas asked Shapiro. “For instance, the state could simply fail to fund the pension systems and then claim an emergency.”
Shapiro repeatedly emphasized the narrow conditions under which the government may assume such control — when it needs to “address an important public purpose,” she said. As to the specifics of what that purpose may be, she said that should be argued in Sangamon County Circuit Court, where a judge invalidated the law last fall without hearing arguments about the merits. If the high court upholds the law, it returns to the county judge.
The case involves four of five state pension systems — lawmakers intentionally did not tinker with the judge’s account because of the conflict posed by the expected court fight.
Gov. Bruce Rauner is aligned with majority Democrats in the General Assembly on the need for reconstructing pensions, although he has different ideas on how. But a high-court setback the issue could widen the budget rift between them, forcing the new governor to make deeper spending cuts than he’s already proposing or agree to the demands of many Democratic legislators to increase revenues.
Those challenging the law — teachers, state employees, retirees, and workers’ unions — are adamant that the constitution’s take on pensions is clear. The groups’ attorney, Gino DiVito, told the court that when voters went to the polls in 1970 to approve the charter, the voter’s guide said of the clause, “This section is new and self-explanatory.”
“This is a case about a constitutional provision, one that is explicit, clear and unambiguous and it is subject to no stated exception,” DiVito said. “The state has not cited a single case where the reserve sovereign powers, the police powers, have been held to override a constitutional provision, and that’s because there is no such case.”
The law, aiming for solvency by 2044, was signed in late 2013 after years of hand-wringing over a deepening abyss. It reduced benefits that current state employees will collect in their golden years — notably, cutting off the automatic, 3 per cent compounded cost-of-living increase granted in 1989.
It’s unclear when the court will rule, but it has handled the case on an expedited basis. If it upholds the law, the case returns to Sangamon County, where both sides will argue the propriety of invoking the emergency powers.
The case is In Re Pension Reform Litigation.
Contact John O’Connor at http://twitter.com/apoconnor