CHICAGO, July 3 A ruling expected Thursday from
the Illinois Supreme Court involving a change to public worker
benefits could provide insight on how justices may eventually
rule on the constitutionality of a landmark state pension reform
The case before the state's highest court involves a 2012
Illinois law that allowed the state to impose healthcare
insurance premiums on its retired workers.
Retirees and others appealed a March 2013 ruling by Sangamon
County Circuit Court Associate Judge Steven Nardulli, who found
that state-sponsored health insurance is not a guaranteed
pension benefit protected by the Illinois Constitution. In doing
so, Nardulli dismissed class-action challenges backed by the
state's labor unions.
The constitutional provision in question states that
membership in any public sector pension or retirement system
"shall be an enforceable contractual relationship, the benefits
of which shall not be diminished or impaired."
The same provision in the Illinois Constitution is also the
center of attention in lawsuits pending in Sangamon County
Circuit Court against the pension reform law the Illinois
legislature passed in December.
The pension reform law reduces and suspends cost-of-living
increases for pensions, raises retirement ages and limits the
salaries on which pensions are based.
Christopher Mooney, director of the Illinois Institute of
Government & Public Affairs at the University of Illinois, said
a reversal of Nardulli's ruling by the high court would indicate
the pension reform law could also be ruled unconstitutional.
"If you can't do health insurance, you can't do pensions
either," Mooney said.
The preamble to Illinois' pension reform law concludes that
Illinois' fiscal problems cannot be solved without changes to
the retirement system. But Mooney said the argument is "not
going to fly" because the state could raise revenue rather than
If the high court upholds Nardulli's ruling, that would give
the state the option to use retiree healthcare as a bargaining
chip with labor unions in an effort to win support for pension
Judge John Belz, who is hearing the consolidated lawsuits,
in May stopped the pension law from taking effect on June 1
until the challenges are resolved.
Illinois has had the worst-funded pension system among all
U.S. states after decades of skipping or skimping
on pension payments. As a result, credit rating agencies have
slapped Illinois with the lowest ratings among states.
Illinois' unfunded pension liability is $100 billion, while
its unfunded liability for retiree healthcare stood at nearly
$34.5 billion in fiscal 2013.
(Reporting by Karen Pierog; Editing by Dan Grebler)