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Illinois Pension Reform (2013) is Unconstitutional

I promised when I was on the radio to post links to both the act which contains no new Illinois pension reform and a post to an article by Eric Madiar regarding the constitutional amendment which prohibits diminishment or impairment to Illinois State Employee pension rights.
The Illinois legislature amended the Constitution in 1970. It provides:

“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.”

Recently the Illinois legislature passed a new bill to reform Illinois’ Pension system, which is a drag on the Illinois government because of its cost. The way I read it, the most significant change to the new law at least in so far as it impacts Illinois state employees is the reduction of the cost-of-living increase. (COLA). The language of the Act follows:

“[For a] Tier 1 retiree, all automatic increases payable under subsection (a) on or after the effective date of this amendatory Act of the 98th General Assembly shall be calculated as 3% of the lesser of (1) the total annuity payable at the time of the increase, including previous increases granted, or (2) $1,000 multiplied by the number of years of creditable service upon which the annuity is based.”
A link to the act can be found here.

Many, including Senate President John Cullerton, believe the new act is unconstitutional. Madiar’s article discusses the law concerning the constitutional amendment concerning Illinois Pensions. A link to the Eric Madiar’s Article can be found here. His article is very helpful. Eric Miadir is counsel to Senate President John Cullerton.

In 1970 the legislature enacted a constitutional amendment, which prohibits diminishment Illinois state employee pension benefits. In 1970 government funding of the Illinois pension system was not better than not much better than it is now. Madiar goes into some detail about the legislative debate in 1970.

Madiar’s article discusses the constitutions of Hawaii, Alaska, and Michigan, which are somewhat similar in their pension reform amendments. It also discusses four Illinois cases interpreting the 1970 constitutional amendment. In my opinion, it is an excellent discussion of date law surrounding 1970 Illinois constitutional amendment concerning pension reform.

I do not believe the pension reform will survive the virtually certain constitutional challenge. The pension reform is an effort of legislature to reduce payments to current employees. It clearly is intended to diminish and impair employee rights.

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