Big question looms in pension debate: Are cuts legal?

SPRINGFIELD - As lawmakers resume the debate over Illinois's growing retirement fund debts in the coming weeks, perhaps the biggest looming question is whether cutting employees' pension benefits as proposed is legal.

No one knows for sure how the Illinois Supreme Court would eventually rule.

But the stakes are high enough - with nearly $100 billion in pension debt - that even before lawmakers can find a compromise on pension cost cuts, an eventual lawsuit is on everyone's minds.

And if lawmakers can't agree over the legal question in the debate over pensions, it could become yet another point of gridlock in Springfield this year - maybe among the biggest of them all.

Many of those involved say a lawsuit is inevitable, no matter what lawmakers do. Union leaders have promised one over most pension cuts.

"We believe the only route to a pension solution that is fair, sustainable and constitutionally sound is by working together to develop a solution that all parties can support," said Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees union.

If there is a lawsuit, major pension cuts intended to save the state billions of dollars a year eventually could be struck down by the courts following years of review.

Then, lawmakers and the governor would be stuck with even more debt and even tougher choices about how to pay for schools and care for the disabled, not to mention perhaps having to once again start working on the controversial issue from scratch.

That could be the worst nightmare for lawmakers who have already worked for years to break gridlock over one of the state's most pressing financial issues.

And it's a bad dream that bond-rating agencies warned of just this month when S&P downgraded Illinois' credit.

"If there is meaningful legislative action on reform, we believe that there could be implementation risk based on the potential for legal challenges, and it could be several years before reform translates into improved funded ratios and budget relief," an S&P statement reads.

The Illinois Constitution doesn't say much on the matter, but its language appears to be blunt. It says a state pension "shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."

Senate President John Cullerton, a Chicago Democrat, has for more than a year argued that because the constitution says pensions are a contract, lawmakers can't take benefits away without giving something in return.

As a result, he has pushed a plan that would guarantee state-subsidized health care for retirees who take smaller pensions. People could keep their current retirement plan, but they'd lose health care.

"Those who support cutting benefits without offering choices should keep in mind that the severity of a crisis shouldn't trigger blatant disregard for constitutional principles," said Cullerton spokeswoman Rikeesha Phelon.

A competing plan by Democratic Reps. Elaine Nekritz of Northbrook and Daniel Biss of Evanston offers no such choice to retirees. They lay out a plan to cut pension cost-of-living increases, have workers pay more into the system and set up an entirely new retirement plan for teachers. Supporters of that plan say the severity of the crisis could make their plan acceptable in court.

Chicago-Kent College of Law professor Mark D. Rosen has argued that idea could be deemed constitutional despite the apparent ban on reduced benefits if the situation was desperate enough and lawmakers could convince judges the move had to be made for the good of the state.

"We have a lot of constitutional language that is written in absolute ways," Rosen said.

The potential problem with that argument is that the pension systems also were in dire condition in 1970 when the state's constitution was written.

In fact, delegates who drafted the document protected state pensions at least partly because the state was in danger of not paying out benefits to retirees.

Just as Gov. Pat Quinn has used an orange cartoon snake named Squeezy to try to illustrate the harm the state's pension debt does to the state budget, a 1960s report on the same topic included a tornado, sucking up cash.

Some officials at the time even tried to get delegates to soften the constitutional commitment - hedge a little and let future lawmakers cut benefits if they needed to.

That effort was rejected multiple times, and those rejections are part of the reason Cullerton thinks the Illinois Constitution is unbending on cutting benefits without offering retirees something in return.

As a result, Cullerton's most recent proposal combines part of the Nekritz and Biss plan with his own idea to offer a choice to workers.

That bill lays out pension cuts similar to Biss and Nekritz's proposal, but says if judges reject that, his backup plan could become law.

"He is willing to advance a bill that doesn't include the choice element as long as the same bill includes a default plan with a constitutional framework for reform," Phelon said.

Concerns about that plan include skepticism the state would save enough money if teachers and workers are given a choice. If not enough of them take the deal for smaller pension benefits, Illinois might not save the money lawmakers are looking for.

Not only that, but Rosen argues that the very existence of a backup plan takes away from the argument that the need for steeper cuts is urgent.

"That undermines the necessity of plan A," he said.

Of course, even getting a plan to the courts would require Democrats, Republicans, Chicagoans, suburbanites and downstaters to agree on a single proposal in Springfield - an agreement that has so far been impossible to find.

Upcoming budget talks and possibly austere budgets for schools and other programs could force a compromise, but the legal question will loom large.

"One, he is willing to compromise," Phelon said of Cullerton. "Two, he will continue to fight for a proposal that respects the pension clause."

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  As lawmakers debate pension cost reductions, perhaps the biggest looming question is whether it is legal to cut employees’ pension benefits. Mark Black/
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