Pension Case Reaches Climax At Supreme Court

Mar 11, 2015

Credit Amanda Vinicky

The many years legislators spent crafting a measure to rein in the state's pension costs came to a head yesterday in 52-and-a-half minute hearing before the Illinois Supreme Court. It's now up to the seven justices whether a law that reduces employees' and retirees' benefits is constitutional.

Even before then-Gov. Pat Quinn signed the pension overhaul into law just over a year ago, everyone knew it would come to this.

"The court will now call Case 118585, re: pension reform litigation ... Doris Heaton et al vs. Pat Quinn, Gov. of Illinois. Are you ready to proceed?," Chief Justice Rita Garman said as she called the court to order.

Unions had made clear from the onset that they would sue to prevent the law from ever taking effect -- and therefore, from ever cutting into their members' retirement benefits ... benefits that Gwen Harrison, a librarian at the Illinois State Library in Springfield, says she was promised when she took the job.

"This isn't only about the constitution, which is crystal clear," Harrison said after the proceedings, on the court's front steps. "This is about fairness. I paid my share faithfully out of every paycheck, and working people like me, who earn a modest pension, shouldn't be punished for the failures of politicians."

The 2013 law would cut into Harrison's benefits -- as well as all that of all other state employees, teachers outside of Chicago, and public university professors -- in a couple of ways. No longer would they get a 3-percent, compounded cost-of-living increase every year in retirement. And for several years, COLA's would be skipped entirely. The package also hikes the retirement age for younger workers.

It does include some offsets. Employees would see less of their paychecks being diverted toward their retirement. And it basically forces the state to pay its share toward pensions going forward.

Years of politicians using money that was supposed to go toward pensions for other needs is largely how the state built its $111 billion pension debt in the first place.

That pension debt is largely why the state has the nation's worst credit rating, and that's part of the reason the state gives as why the reductions are now necessary.

To attorneys like Aaron Maduff, who represents university beneficiaries, that's circular logic: "What kind of

Attorney Aaron Maduff represents university beneficiaries.
Credit Amanda Vinicky

   a message would an opinion from this court saying that the state can come in and create the problem ... I hesitate to say the say the Lizzie Borden defense, but 'I've killed my parents, have mercy on me, I'm an orphan!' I mean. This is a situation of the state's making. What credit will the state have as we go forward on any other contract that it has?"

For Maduff and the team of attorneys representing unions, workers and retirees, it comes down to the last few words in a single sentence in the Illinois constitution. It says retirement benefits "shall not be diminished or impaired."

Gino DiVito, another plaintiff's lawyer (and former appellate judge), says that's pretty clear-cut.

"The pension protection clause is plain, clear unambiguous language. With again, no stated exception. We note that the language is so simple and plain, that the voters' guide concerned the 1970 constitution, the guide for the voters to aide them in understanding what they were voting for, simply said 'this section is new and self-explanatory,'" he said.

So far, the law is on their side.

A Sangamon County Circuit Court judge ruled in November that the pension overhaul was unconstitutional on its face because of that pension clause. And in a separate case known as "Kanerva," the Illinois Supreme Court handed down an opinion just last year that says healthcare subsidies promised by the state to retirees count as a protected pension benefit.

But then -- unlike now -- the state didn't use the argument it used in this case: that it has police powers it can implement in emergencies.

"Plaintiffs' position is remarkable," said Solicitor General Carolyn Shapiro, arguing on the Attorney 

Credit Amanda Vinicky

General's behalf. "If there were prolonged deflation, such that every penny of state revenue was going to pay pensions, no changes could be made. If the state's bond rating collapsed, rendering borrowing borrowing prohibitively expensive, pensions would be entirely off limits? Regardless of the essential state services that might have to be eliminated. And if there were a catastrophic epidemic, or a natural disaster, pensions could not be even temporarily reduced, even at the expense of live-saving services for most of the state. Now these scenarios may sound extreme. They are." While the employees' attorneys focused on the latter portion of the pension clause, Shapiro honed in on a three other key words in the sentence -- "enforceable contractual relationship."

Shapiro says that 150 years of case law allow for contracts to be modified in cases of emergency; and pensions are no exception.

"Plaintiffs' reading of the diminish and impair language leaves the contractual relationship out of the clause entirely," Shapiro said. "If public pensions have an absolute protection, then they are not contractual relationships. In fact, if they have an absolute protection, then a variety of different contract doctrines, that might under some circumstances allow for the reduction of pensions, cannot apply. In other words, plaintiff's reading creates not just surpassage, but an internally inconsistent clause that's at war with itself." Shapiro's asking the Supreme court to uphold the law on its face; and then send it back to a lower court to decide if the police powers threshold has been met.

At least one Justice, Robert Thomas, didn't appear to be persuaded. Thomas peppered Shapiro with questions, like this one: "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? For instance, the state could simply fail to fund the pension systems and then claim an emergency, correct?"

Thomas also wondered how Illinois could act like its exhausted all other alternatives for climbing out of a "fiscal emergency" given that the income tax rate went down at the start of this year. He called it "incongruous." 

Sen. Kwame Raoul, D-Chicago, who helped draft the pension law, sat in the front row to watch the pension arguments.
Credit Amanda Vinicky

  The justice's line of questioning was enough to make Sen. Kwame Raoul, D-Chicago, who had a front row seat for the arguments, pessimistic about its changes for survival.

"I think the indications are that we'll be back ... there won't be a remand and we'll be back to the negotiation table," he said.

Still, for all of the speculation, there's really no telling what the court will do. Or when they'll make the decision.

That holds true even for one of the law's main sponsors, the powerful Democratic House Speaker, Michael Madigan, who said shortly after its passage "we'll all just wait to see what the seven justices do." Reporters, included.

Whatever they decide, the justices' own pensions won't be affected.

Madigan says judicial pensions were exempted from the law, to "relieve them of the burden of dealing with a conflict of interest."