By Ron Kramer and Jim Goodfellow

Today, a Sangamon County Circuit Court judge in In re: Pension Litigation, struck down Illinois’ pension reform law, Public Act 98-059, in its entirety as unconstitutional.

By way of background, Illinois faces a pension funding crisis that has been reported at over $100 billion dollars.  The aim of the pension reform law was to save the state $160 billion over the next 30 years by decreasing cost-of-living adjustments, capping pensionable salaries, and raising retirement ages, among other reforms. The law was set to go into effect on June 1, but implementation had been stayed pending the outcome of this litigation.

The Court concluded that the pension reform law impaired and diminished retiree benefits in violation of Article XIII, Section 5 of the Illinois Constitution, which clearly and unambiguously prohibits the impairment or diminishment of retiree benefits.  The Court struck down the State’s affirmative defense claims that it could diminish benefits despite the Article XIII of the Constitution based upon an exercise of the State’s “reserved sovereign powers or police powers.”  There was “no such legally valid defense” according to the Court,  because the pension protection clause of the Constitution does not provide for any such exception or limitation. In light of this conclusion, the Court did not even need to address the merits of the State’s defense.

In essence, the Court followed the rationale set forth in the Illinois Supreme Court’s recent decision in Kanerva v. Weems, 2014 IL 115811, wherein the Supreme Court concluded that the Illinois Constitution’s pension protection clause protects the state’s subsidization of health insurance for retirees from any unilateral diminishment and impairment. Undeterred, the Governor and Attorney General have stated that they will move for an immediate appeal of the In re: Pension Litigation decision to the Supreme Court. Given the Supreme Court’s ruling in Kanerva, however, it is unlikely that this decision will be overturned on appeal.