The government of Illinois—a Democratic Party-controlled government at the time—reduced the cost of its public pension programs by passing a law reducing future cost growth, specifically, by reducing the size of future increases in pension payouts, without eliminating those increases.
Illinois’ Constitution has this to say on the matter of public pensions:
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.
Illinois State Judge John Belz decided that the enacted law was a violation of Illinois’ constitution and struck the law.
The state of Illinois made a constitutionally protected promise to its employees concerning their pension benefits[.]
[I]t is clear 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.
Yet what “qualifies as a benefit” is a matter of statutory definition, a matter set by the Illinois’ legislature. Belz’ ruling indicates that these legislative definitions are, in fact, amendments to Illinois’ constitution—else those definitions must be changeable at legislative initiative, as the law Belz has struck did.
Among his objections is this:
The Act adds new language to the Pension Code….
Now the whole Pension Code, enacted by the legislature and not by constitutional convention, is suddenly a part of the State’s constitution.
Belz’ ruling goes on in that vein.
Belz also seems to have misunderstood what the legislature has done in concrete terms. As he clearly understands, the legislature acted to reduce the size of future pension payouts, changing, for instance, the way a (future) pensioner’s 3% annual increase in pension payment is calculated. The pensioner still gets an increase, though. A smaller increase, as any third grade pupil in arithmetic easily understands, still is an increase. A pensioner’s pension in no way is diminished or impaired, by the definition of increase.
Finally, a practical question: a State’s police powers are an assertion that the State can use its governance offices to act to protect public safety and welfare—to prevent a State from being unable to honor its financial commitments and defaulting altogether, for instance. Thus, if Illinois’ government is unable to act to pay its pension obligations, how does Belz propose those obligations be met?
The judge screwed up, and the State is appealing.
Belz’ summary judgment order can be read here.