Breaking: Illinois Supreme Court issues ruling in case regarding state retiree health care benefits

July 3 2014

Illinois Policy Institute attorneys, pension experts disagree with ruling; statement from CEO John Tillman below

CHICAGO (July 3, 2014) – Illinois Policy Institute CEO John Tillman issued the following statement today regarding the Illinois Supreme Court ruling in Kanerva v. Weems.

“We disagree with today’s ruling by the Illinois Supreme Court regarding how much the state is required to pay toward retired state worker health-insurance benefits. Here’s why:

1. Illinois has more than $56 billion in retiree health insurance debt for former state workers. Illinois has no money set aside to pay for this benefit. Today, most retired state workers pay almost nothing for this generous benefit that allows them to retire in their 50s with full health coverage, or to supplement Medicare coverage in their later retirement years.

2. The law in question would have required employees to pay more toward their health insurance in retirement, which is not an unreasonable request; most states that even offer this benefit ask retirees to pay half of the premium. This benefit is unheard of in the private sector. However, the Illinois Supreme Court ruled that the state cannot ask retirees to pay more for this very generous benefit because that would violate the Pension Clause of the Illinois Constitution, which prohibits pension benefits from being “diminished or impaired.”

From a legal standpoint, the ruling is incorrect because retiree health-insurance benefits aren’t found in the pension code. These benefits were created separately from the pension systems, are not administered by the pension systems, receive no contributions from the pension systems, have no impact on how a pension is calculated and are not protected in other states whose constitutional language Illinois borrowed for the state’s Pension Clause. These are not benefits of a pension system, but rather are, as their name implies, other post-employment benefits.

3. The practical implication of this ruling is that the primary purpose of government now is to fund public employees and their benefits —not to serve the common good. This is wrong and deeply unfair, especially since paying for these unsustainable benefits will fall on the backs of Illinois taxpayers.

Taxpayers simply can’t continue picking up the tab for politicians’ fiscal mismanagement and promises that were made but have always been unsustainable. When the trial court looks at the December pension law, which barely moved the crisis back to 2011 levels, we hope they will consider the gravity of the crisis and issue a ruling that will not put the public employees ahead of the public they are meant to serve.”

More on the legal ramifications of this case: 

The good news is that the legal battle is far from over. The court said that the Pension Clause protects this particular type of benefit, but it did not rule on whether the reform at issue was actually unconstitutional. As Illinois Supreme Court Justice Anne Burke points out in her dissenting opinion, that is still up to the trial court to determine.

In fact, the Pension Clause’s protection of benefits of any type is not absolute. Supreme Court precedent allows the state to modify its contractual obligations when doing so is necessary to serve an important public purpose. And saving the state from insolvency and economic disaster is an extremely important public purpose.