Time for pension reform 2.0


July 3, 2014 5:10PM

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Updated: August 7, 2014 6:23AM

The Illinois Supreme Court on Thursday said loudly, clearly and ominously that public employee pension benefits in the state cannot be cut.

That can mean only one thing: State and local lawmakers had better get working on a Plan B. Illinois needs alternatives to the state pension-reform law passed in December and to the Chicago pension-reform law passed in May. The options are limited — it may come down to a constitutional amendment — but the state’s best minds better get cracking.

It isn’t an exaggeration, even in the slightest, to say Illinois’ future depends on it.

Thursday’s 6-1 ruling did not cover the state bill, which cuts benefits for state and university employees, legislators and teachers outside Chicago, nor did it affect the Chicago bill, which impacts pensions for municipal workers and laborers.

In this case, the justices ruled that subsidized health care for retired state employees is protected under the Illinois Constitution and can’t be cut, just like pension benefits.

Just like pension benefits.

A backup plan by state lawmakers is imperative because when the legal challenge to the state pension law makes it to the Supreme Court in the next year or two, the odds just went up that it will be found unconstitutional.

No one ever thought a pension-reform law would breeze through the Supreme Court; the Constitution prohibits benefits from being “diminished or impaired.” State lawmakers took that into account in drafting the reform bill, looking high and low for ways to inoculate the bill constitutionally. In the state worker bill, for example, employees will get a state funding guarantee and a reduction in their annual contributions in exchange for reduced benefits. Proponents also argue, convincingly, that the state’s dire finances and the precarious nature of the pension funds themselves render the constitutional protection less than absolute.

Thursday’s decision is by no means the definitive word on
pension reform, though even supporters agree it’s a bad omen. It’s also a blow to the state’s and Chicago’s efforts to reduce crushing health care costs, and we question — as Justice Anne Burke did in her dissent — whether the judges erred in ruling that health care benefits are protected in the same way pension benefits are protected.

There is now but one key question: Does a viable pension reform alternative exist? A bill pushed by Senate President John Cullerton, considered an alternative by many, is now almost certainly off the table. That bill gave workers a choice between full pension benefits or subsidized health care — choose pension benefits and health care would be cut. Given Thursday’s ruling, that now seems highly dubious.

One possibility would be to amend the constitution to modify the pension protection clause — not eliminating it but weakening it some. However, this is a lengthy process and may still not protect the state legally if it reduces benefits already promised.

The answers are elusive and the challenges tremendous, but Illinois has come too far to give in now. Over the last five years, the state has made significant strides in cleaning up its fiscal house. And though imperfect, the pension-reform bill builds on that by opening a path to genuine solvency.

In Chicago, the picture is even more bleak, with city pensions in even worse shape than the state’s. Without cost-cutting, the pension funds could easily go belly up even as city residents get hit with dramatic increases in taxes and service cuts.

A final note: For all those outraged with the Supreme Court justices, save your fire. Their job is to interpret the law and the Constitution. Target your outrage at lawmakers, and to a lesser degree union leaders, who for years promised benefits that Illinois couldn’t afford and also failed miserably to make too-low required annual payments.

Channel that outrage where it can do some good: Coming up with a Plan B.

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