December 5, 2014 / 1:54 AM / 5 years ago

Illinois asks high court for pension law hearing as soon as January

CHICAGO (Reuters) - Illinois’ top attorney asked the state supreme court on Thursday to put constitutional challenges to a pension reform law on the fast track by scheduling oral arguments as soon as Jan. 22 and no later than March 10.

Attorney General Lisa Madigan filed a motion to accelerate the state’s appeal of a Nov. 21 Sangamon County Circuit Court judge’s ruling that the law aimed at easing Illinois’ huge pension burden violated protections in the state constitution for public worker retirement benefits.

“A prompt resolution of those issues is critical because the state must either implement the act, or in the alternative, significantly reduce spending and/or raise taxes,” the motion stated.

At stake is an approximately $1 billion cut in Illinois’ contribution to four of its pension systems in fiscal 2016 under the law. Republican Governor-elect Bruce Rauner, who takes office next month, has a Feb. 18 deadline to present a budget to the Democrat-controlled legislature, which has until May 31 to pass the spending plan with simple majority votes. A three-fifths majority vote on bills would be needed after that date to have a budget in place by July 1, the start of fiscal 2016.

Illinois has the worst-funded state retirement system, and its huge unfunded pension liability, which hit $104.6 billion at the end of fiscal 2014, has helped pound its credit ratings to the lowest level among states. Rating analysts said on Thursday that the state could face further downgrades if its finances deteriorate more in the coming months.

The reform law was enacted in December 2013 to help save Illinois’ sinking finances. It reduces and suspends cost-of-living increases for pensions, raises retirement ages and limits salaries on which pensions are based. Employees contribute 1 percent less of their salaries toward pensions, while contributions from the state, which has skipped or skimped on its pension payments over the years, are enforceable through the Illinois Supreme Court.

Although the law was slated to take effect on June 1, Sangamon County Court Judge John Belz put it on hold in May, pending his ruling in five consolidated lawsuits brought by public labor unions and retiree groups.

Belz rejected Illinois’ arguments that pensions could be cut to protect the public welfare in an emergency, including the state’s precarious financial situation. He ruled that Illinois made a constitutionally protected promise to its employees concerning their pension benefits.

Reporting by Karen Pierog; Editing by Lisa Shumaker

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