By: Brittany Flaherty Theis
In this two-part discussion, we describe and explain the constitutional challenges filed in response to the adoption of Public Act 98-599 (the “Act”) and the Illinois Supreme Court’s decision regarding the Act. Part One discussed the primary provisions found in the Act, as well as the legal complaints filed in courts throughout the State. Part Two will discuss the decision of the Illinois Supreme Court in which it found the Act unconstitutional.
Appeal from the circuit court’s judgment finding the Act unconstitutional was taken directly to the Illinois Supreme Court, because the circuit court’s judgment (discussed here) invalidated a law of the State of Illinois. After expedited briefing and argument, the Illinois Supreme Court filed its opinion on May 8, 2015. In its opinion, the Court discusses the history of the pension protection clause of the Illinois Constitution, the history of statutory funding mechanisms for the five State-funded retirement systems, some basic features of one of the five State-funded retirement systems, the Act, and the procedural history of this case.
The issues before the Illinois Supreme Court included:
- Whether the Act’s reduction of retirement annuity benefits owed to members of four of the State-funded retirement systems violates the pension protection clause in the Illinois Constitution of 1970?
- If so, can the Act’s reduction of those benefits nevertheless be upheld as a proper exercise of the State’s police power?
- If not, are the invalid provisions of the Act severable from the remainder of the statute?
The Court resolved the first issue easily, stating that the members of pension plans subject to the provisions of the pension protection clause have a legally enforceable right to receive the benefits they have been promised when an individual embarks upon employment in a position covered by the public retirement system (not when the employee ultimately retires). The opinion explained that “if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired” and “[r]etirement annuity benefits are unquestionably” such a benefit. Therefore, the Act violated the pension protection clause of the Illinois Constitution.
Next, the Illinois Supreme Court analyzed the State’s position that funding for the pension systems and State finances in general have become so dire that the General Assembly is authorized to invoke the State’s police powers to override the rights and protections in the pension protection clause in the interests of the greater public good. The Court stated that “[e]xigent circumstances are not enough. Neither the legislature nor any executive or judicial officer may disregard the provisions of the constitution even in case of a great emergency.… No principle of law permits us to suspend constitutional requirements for economic reasons…no matter how compelling those reasons may seem.”
The State argued that because membership in public retirement systems is an “enforceable contractual relationship” it should be subject to the same limitations as all other contractual rights. This argument was also rejected by the Court because “while impairment of a contract may survive scrutiny under the contracts clause if reasonable and necessary to serve an important public purpose, ‘the severity of the impairment measures the height of the hurdle the state legislation must clear,’” and the factors used to compute public pension benefits are an impairment which is “‘obviously substantial.’”
Additional scrutiny is applied where, as here, the State is a party to the contract and less deference is given due to the State’s self-interest. In assessing whether legislation is necessary to advance the public interest, courts consider whether the provisions the State seeks to change had effects that were unforeseen and unintended and whether the State’s purposes could be achieved through less drastic measures. The Court had earlier detailed the legislative history of the Act and determined that the funding problems were entirely foreseeable and the crisis is one “for which the General Assembly itself is largely responsible.” Additionally, the Court discussed alternative, less drastic measures. It went on to add that the United States Constitution “bars Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.”
The Illinois Supreme Court found the State’s police powers argument flawed for other reasons. One such reason is the fact that legislative history shows the drafters of the 1970 Illinois Constitution specifically rejected a proposal that would have reserved the ability for the State to step in when public safety and welfare required in favor of the separate, more specific provisions of the pension protection clause. The pension protection clause was “a statement by the people of Illinois made in the clearest possible terms, that the authority of the legislature does not include the power to diminish or impair the benefits of membership in a public retirement system. This is a restriction the people of Illinois had every right to impose.” It is the people of the State that possess all of the power originally, and the powers they have reserved are shown in the prohibitions set forth in the Illinois Constitution. For that reason, although the police powers of the legislature are broad and far-reaching, case law makes clear that their exercise must not conflict with the constitutions. The Act is not justified by the State’s police powers or the provisions of the contracts clause.
After determining the Act was unconstitutional and did not fall under the State’s police powers, the Illinois Supreme Court found that the unconstitutional provisions of the Act could not be severed from the remaining provisions of the Act. This was, in part, because the legislators described the numerous provisions at issue as “all part of an integral bipartisan package.” For that reason, the annuity reduction provisions are “not merely central to the statute, they are its very reason for being.” To leave just the remaining provisions standing would no longer reflect the legislature’s intent. Therefore, the entire Act was held to be void and unenforceable.
The Illinois Supreme Court spoke clearly when it said the Act is unconstitutional. How the legislature will proceed remains unclear. Whitt Law will continue to closely monitor the State’s activities regarding pension reform. Please contact Whitt Law Attorney Brittany Flaherty Theis if you have any questions about the Illinois Supreme Court’s opinion.
Sources and Notes:
In re Pension Reform Litigation (Doris Heaton et al., Appellees, v. Pat Quinn, Governor, State of Illinois, et al., Appellants), 2015 IL 118585 (May 8, 2015).
“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.” The Pension Protection Clause of the Illinois Constitution of 1970 (Article XIII, Section 5).
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