Judge Rules Illinois Pension Law Unconstitutional

An Illinois judge ruled Friday that a law intended to fix the nation's worst state employee pension crisis violates the state constitution, deciding in favor of state employees and retirees who sued to block the landmark overhaul.

The overhaul had been approved by lawmakers and Democratic Gov. Pat Quinn last year. Years of underfunding had put the state's pension systems roughly $100 billion short of what they need to cover benefits promised to employees.

Quinn's office released a statement saying it anticipated legal challenges and would urge the Illinois Supreme Court to take up the matter quickly.

"We're confident the Illinois Supreme Court will uphold this urgently needed law that squarely addresses the most pressing fiscal crisis of our time," Quinn spokesman Grant Klinzman said in a statement.

If the ruling by Sangamon County Circuit Judge John Belz is upheld, lawmakers would have to go back and come up with another plan.

That would be yet another financial challenge for the incoming Republican governor, Bruce Rauner, who takes office in January and opposes the current pension law.

The overhaul reduces benefits for retirees to significantly cut the debt, but also reduces employee contributions. The lawsuit said the constitution prohibits reducing benefits or compensation once they're promised.

Illinois argued that pensions are a "contractual agreement," which the government may modify, particularly in a crisis. In this case, it said the state faced a fiscal emergency.

"The court held today, as our unions have long argued, that the state cannot simply choose to violate the constitution and diminish or impair retirement benefits if politicians find these commitments inconvenient to keep," said a statement from We Are One Illinois, a coalition of unions opposed to the pension overhaul.

While litigants initially didn't think the case would be settled before 2015, Belz said in September he'd like to quickly move any challenge over the pension overhaul to the Supreme Court.

His action follows a July Supreme Court ruling that requiring state retirees to pay more for health insurance was unconstitutional. Belz had called that ruling "an elephant in the room," increasing speculation that the pension overhaul could suffer the same fate.

Contact John O'Connor at https://twitter.com/apoconnor