An Illinois judge on Friday rejected the state’s effort to bolster its shaky public pension system, giving public workers a reason to rejoice that could prove short-lived.
Judge John W. Belz of the Sangamon County Circuit Court in Springfield found that the pension overhaul enacted in December 2013, which reduced some benefits, violated a clause in the State Constitution that makes pensions “an enforceable contractual relationship” that cannot be impaired.
The state’s attorney general, Lisa Madigan, said she would appeal the decision to the State Supreme Court.
The decision opens a new and unpredictable chapter in the state’s continuing pension problem. Governor-elect Bruce Rauner is a Republican who favors a so-called defined-contribution system, which would leave it up to public workers to invest their own retirement money in vehicles like 401(k) plans. That would insulate the state budget and relieve taxpayers from having to bear large investment risks in the existing defined-benefit system, which guarantees retired workers a set amount. The unions representing public workers would almost certainly fight such a change. But by rejecting the overhaul led by the departing governor, Pat Quinn, Judge Belz may have cleared the way for Mr. Rauner to seek a pension remedy more to his liking.
“Today’s ruling is the first step in a process that should ultimately be decided by the Illinois Supreme Court,” Mr. Rauner said in a statement on Friday. “It is my hope that the court will take up the case and rule as soon as possible. I look forward to working with the Legislature to craft and implement effective, bipartisan pension reform.”
Mr. Rauner has previously said he thought Governor Quinn’s pension overhaul did not go far enough.
Illinois has one of the most severely mismanaged public pension systems of any state, with a total shortfall estimated at $111 billion. Not only does the huge imbalance put public workers’ benefits in jeopardy, but as more and more are qualifying to retire and draw their benefits, the situation is also undermining the finances of the whole state.
Public employees’ groups have complained in recent years that the pension system’s troubles have been fueled by the state’s failure to make big enough contributions to keep it in good shape. For two decades, the Illinois Legislature has worked with a statutory funding schedule that gives an appearance of order while allowing debt to snowball off the balance sheet.
The state’s Democratic leadership wrestled with the pension problems for several years but produced few meaningful results. In a state dominated by the Democratic Party that is home to a Democratic president, the issue was particularly vexing because public sector unions were otherwise solidly lined up behind Democrats. Finally, late last year, lawmakers and Governor Quinn reached a deal despite the unions’ strenuous objections.
All along, the question of whether changes were a violation of the State Constitution loomed. And it did again during Mr. Quinn’s unsuccessful re-election effort. Both chambers of the State Legislature remain controlled by Democrats.
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