CHICAGO, March 19 (Reuters) - An Illinois judge on Tuesday ruled that healthcare for retired state workers does not have a constitutional guarantee, a decision that could help lawmakers who are trying to pass reforms of the state's badly underfunded pension system.
The ruling dismissing class-action challenges to a 2012 law that gave the state the ability to change health care premium rates for retirees was a setback for public labor unions opposed to any changes in retirement benefits.
Senate President John Cullerton wants to allow state workers to choose between keeping current pension benefits or maintaining access to state retiree health care insurance.
Sangamon County Circuit Court Associate Judge Steven Nardulli found that health insurance is not a guaranteed pension benefit protected by the Illinois Constitution.
Unions, including the American Federation of State, County and Municipal Employees Council 31, had backed the lawsuits, contending the law would saddle state and university retirees with unaffordable premium increases. They also argued that health care coverage carried the same constitutional protection as pensions.
"We continue to believe this law impairs the rights of men and women who retired after careers with state government or state universities to obtain health insurance coverage according to the terms in place when they retired," AFSCME Council 31 Executive Director Henry Bayer said in a statement.
He added that the union will consult with the plaintiffs and other unions about options in the wake of the ruling.
Illinois lawmakers are struggling to rein in burgeoning pension costs that threaten funding to core state services such as education and public safety. The lack of a solution to the state's huge $96.8 billion unfunded liability and low 39 percent funded rate for pensions had led to downgrades of Illinois' credit ratings and higher borrowing costs.
Cullerton, a Democrat, said the ruling reinforces his position that health care access can be negotiated in exchange for pension reform.
"While I acknowledge that there are a number of ways to structure a bill, I believe that a reform based on contractual principles of offer, consideration and acceptance is the best way to ensure that the legislation is upheld in court," he said in a statement. "I will continue to advocate that giving state employees and retirees a choice between cost of living allowances and access to health care is the best way forward".
Governor Pat Quinn, a Democrat, called the ruling "good news for the taxpayers and another step forward in our effort to restore fiscal stability to Illinois."