(Bloomberg) -- The Illinois Supreme Court rejected the state’s solution for its worst-in-the-U.S. $111 billion pension- funding shortfall, throwing into doubt how its financial crisis will be resolved.
The dispute was being watched around the country as state and local governments grapple with total pension deficits that exceeded more than $2 trillion, according to a Moody’s Investors Service report last year. Closing that gap in many states conflicts with union contracts and even constitutional pension guarantees for public employees.
A lawyer for New Jersey Gov. Chris Christie was sharply questioned by that state’s highest court this week when he argued for a law to rein in public-employee pension costs he called “unsustainable.”
Illinois’s pension reform bill was signed by now-former Governor Pat Quinn in late 2013. A state judge blocked the law before it took effect last June after public worker unions sued. Illinois Attorney General Lisa Madigan in March asked the state’s top court to resurrect the law, which sought to cut cost-of-living increases and boost the retirement age.
The judge that voided the law concluded it violated a provision added to Illinois’s constitution in 1970 that bars the diminishing of public worker retirement benefits. The seven- member high court agreed Friday in a unanimous ruling.
Grave problems
“In ruling as we have today, we do not mean to minimize the gravity of the state’s problems or the magnitude of the difficulty facing our elected representatives,” Justice Lloyd Karmeier wrote. “It is our obligation, just as it is theirs, to ensure that the law is followed.”
During arguments before the court in March, Solicitor General Carolyn Shapiro argued the state should be able to invoke its right to make necessary laws to protect public welfare and safety in a time of fiscal crisis.
The justices rejected the argument.
“Crisis is not an excuse to abandon the rule of law,” according to the ruling. “It is a summons to defend it.”
Natalie Bauer, a spokeswoman for the attorney general, declined to comment immediately on the ruling. Quinn was voted out of office in November and succeeded by Republican Bruce Rauner. The governor’s spokeswoman, Catherine Kelly, declined to comment immediately on the court’s ruling.
Retiree ‘victory’
Democratic Senate President John Cullerton, who previously voiced concern about whether the legislation could withstand a legal challenge, called the ruling “a victory for retirees, public employees and everyone who respects the plain language of our constitution.”
That outcome, he said, “should be balanced against the grave financial realities we will continue to face without true reforms.”
We Are One Illinois, a coalition of public-worker unions that pressed the legal challenge, applauded the decision.
“With the Supreme Court’s unanimous ruling, we urge lawmakers to join us in developing a fair and constitutional solution to pension funding,” state AFL-CIO President Michael T. Carrigan said Friday in a coalition statement. “We remain ready to work with anyone of good faith to do so.”
The case is In Re Pension Reform Litigation, 111585, Illinois Supreme Court (Springfield).
With assistance from Elizabeth Campbell and John McCormick in Chicago.
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