CHICAGO — The Illinois Supreme Court on Thursday sided with retired state employees who argued that health insurance coverage is a constitutionally protected retirement benefit, a ruling that could portend trouble for landmark legislation aimed at fixing the worst-funded state pension system in the nation.
The court’s 6 to 1 ruling reverses a lower court decision that effectively allowed the state government to require retirees to pay for part of their own health care. The justices sent the case back to the lower court, where retirees can proceed with their challenge.
The ruling centered on the strength of the constitutional protection for state worker benefits, such as health care and pensions. It was quickly parsed for the signals it sends on an even bigger case: a challenge to the state’s sweeping pension overhaul aimed at fixing an unfunded liability of nearly $100 billion. Unions and retirees are suing over the broader overhaul plan, which also reduces some benefits to retirees.
Illinois Senate President John J. Cullerton (D), who had proposed an alternative pension overhaul plan that would have given employees more choice in their retirement benefits, said the ruling Thursday makes it “very clear” that the state constitution protects employees’ ”promised benefits.”
“If the Court’s decision is predictive, the challenge of reforming our pension systems will remain,” Cullerton, who supported the pension overhaul, said in a statement following the ruling.
Both cases pivot on a clause of the constitution that states that membership in a government pension or retirement system “shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” Opinions varied on whether Thursday’s ruling was a sure signal of how the justices would rule on the larger pension challenge.
“As far as a pennant waving in the wind, [Thursday’s ruling] certainly suggests the Illinois Supreme Court feels it’s a very strong pension guarantee clause,” said Ann M. Lousin, a professor at John Marshall Law School in Chicago. But she said it was far from the final word on the issue.
Illinois Attorney General Lisa Madigan said the arguments in the two cases are different. The state is arguing that it can use its emergency powers to reduce benefits in times of fiscal crisis. Her father, House Speaker Michael Madigan, was a chief architect of the pension overhaul.
“As a result, this opinion has no direct impact on the pension reform litigation arguments,” her spokeswoman Maura Possley said in a statement. “We will continue to vigorously defend the pension reform law.”
Democratic Gov. Pat Quinn’s office also released a statement backing the constitutionality of the pension law. “We’re confident the courts will uphold this critical law that stabilizes the state’s pension funds while squarely addressing the most pressing fiscal crisis of our time by eliminating the state’s unfunded pension debt,” said Quinn spokesman Grant Klinzman.