The Illinois Supreme Court ruled today that subsidized health care premiums for retired state employees are protected under the Illinois Constitution, signaling potential trouble for an overhaul of pension benefits that’s also being challenged in court.
Today’s ruling also could affect the city of Chicago’s ongoing phase-out of retiree health insurance subsidies, a program Mayor Rahm Emanuel was counting on to save millions of dollars a year, as well as legislation recently approved to modify the pension plans of city workers and laborers.
The 6-1 decision centers around a 2012 law that allowed the state to charge retired workers for health care insurance premiums, which many did not have to pay depending on how long they worked for the state.
Retired workers sued, arguing the changes violated a provision in the state constitution that declares pension benefits “shall not be diminished or impaired.” Attorneys for the state argued the constitution did not specifically declare health care benefits were protected.
In Thursday’s ruling, the justices argued “there is nothing in the text of the Constitution that warrants such a limitation.”
“We conclude that the state’s provision of health insurance premium subsidies for retirees is a benefit of membership in a pension or retirement system within the meaning (of the Constitution) and therefore the General Assembly was precluded from diminishing or impairing that benefit,” justices wrote in their opinion.
The same constitutional clause protecting pension benefits is at the heart of several lawsuits challenging broader pension changes lawmakers passed in December. That measure reduces costs-of-living increases and raises retirement ages, among other changes.
Opponents in the pension battle have long argued over whether the framers of the 1970 state Constitution intended to protect pension benefits against any future changes, or whether there was wiggle room in their language.
The high court did not settle that debate in the healthcare case today, but the language in the majority opinion seemed to support the contention that pension benefits cannot be reduced.
The court said comments by the constitution's framers demonstrate the pension clause "was intended to eliminate the uncertainty that existed under the traditional classification of retirement systems and to guarantee that retirement rights enjoyed by public employees would be afforded contractual status and insulated from diminishment or impairment by the General Assembly."
State Senate President John Cullerton said today the opinion reinforced his longtime fear that the court will reject the pension reform law signed by Gov. Pat Quinn last year and hailed by some politicians as the best solution to a $100 billion unfunded liability in pension obligations to state retirees.
“Today, the Illinois Supreme Court made it very clear that the Pension Clause means what it says," Cullerton said in a statement. "If the Court’s decision is predictive, the challenge of reforming our pension systems will remain."
But a spokeswoman for Attorney General Lisa Madigan said the decision "has no direct impact" on the pension litigation.
"While this decision is very clear on the fact that the pension clause covers health care benefits, the arguments in the pension reform litigation are different than the ones in this healthcare case," attorney general spokeswoman Maura Possley said in an email. "We will continue to vigorously defend the pension reform law."
Supporters of the pension reduction law say those legal issues revolve around the question of whether the legislature essentially has emergency powers to modify the benefits in order to deal with a funding crisis and ensure the stability of the pension funds.
"This landmark law was urgently needed to resolve the state’s $100 billion pension crisis," Quinn spokesman Grant Klinzman said in an email. "It was also urgently needed to ensure that teachers, university employees and state workers who have faithfully contributed to the pension system have retirement security.
"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."
But leaders of the state's largest public employee labor union hailed the decision as a positive sign in their opposition to the pension changes.
"The Supreme Court ruled today that men and women who work to provide essential public services -- protecting children from abuse, keeping criminals locked up, caring for the most vulnerable and more -- can count on the Illinois Constitution to mean what it says," AFSCME Council 31 executive director Henry Bayer said in a statement. "Retirement security, including affordable health care and a modest pension, cannot be revoked by politicians."
Justice Anne Burke dissented from the majority, saying the pension protection clause does not cover healthcare premiums. The action reverses a ruling by a Sangamon County Circuit Court judge and returns the case to the lower court for a decision on the merits of the case.
The decision may also trigger new action in the legal fight over Chicago public employees.
When it comes to city retiree health insurance, a federal appellate court was waiting for today’s decision before weighing in on a lawsuit that aims to reverse Emanuel’s decision to phase out the insurance, said Clint Krislov, the attorney who challenged the phase-out in court.
Before the phase-out started on Jan. 1, Krislov sued to block it, but a federal trial court ruled against him. The appeal, he said, was put on hold by an appellate court pending today’s Supreme Court decision, he added.
“This is great,” Krislov said of the decision. “This is basically what we’ve been saying. . . . I think this will finally get the (city) retirees back to where they ought to be.”
Krislov, who first sued the city 27 years ago to protect retiree health care in the so-called Korshak case, said city retirees have an even stronger case than their state counterparts.
A ruling against the city could exacerbate financial shortfalls, as the city in 2012 paid $109 million on the health care that is now being phased out.
Emanuel also was counting on savings from the health insurance phase-out to help pay the city’s increased costs under recently passed legislation to modify the pension funds of city workers and laborers. That legislation also specifically barred city and municipal laborers funds from contributing to retiree health care costs.