State Supreme Court hears pension reform arguments

From Illinois News Network

There are clear arguments the State Supreme Court must consider after a hearing Wednesday in Springfield over pension reform.

The justices heard from Carolyn Shapiro, the State Solicitor General, that the dire financial mess Illinois faces, caused not only by poor management by the state, but by the Great Recession of 2008 and unexpected inflation, means the state has the ability to modify contracts.

“But the necessary consequence of what plaintiffs are demanding and the circuit court agreed to would tie the state’s hands when it’s need to act is most pressing. We cannot emphasize enough the reality that accepting plaintiffs’ absolutist reading of the pension clause has effects that go far beyond this case.”

Plaintiffs’ attorney Gino DiVito contends that the doomsday scenario the state is using is not at the center of the case.

“That argument simply doesn’t apply here. That’s not the situation. That’s not the case before this court. The case before this court is an invocation of the General Assembly concerning fiscal problems an adequate basis for ignoring a constitutional provision.”

DiVito says the pension protections in the state constitution are clearly different than the contract clause in either the state or federal constitution. Justices asked the state several times about whether any emergency means they can alter benefits.

Plaintiffs’ attorney says state using Borden defense

One recurring question from several State Supreme Court justices was if the state can say there’s a fiscal crisis and that justifies the police powers to modify contracts, what’s to stop them from doing so in the future?

The state’s response was there has to be a substantial reason with targeted and tailored solutions, something the state Solicitor General says the challenged law provides.

But Aaron Maduff, an attorney representing the State Universities Annuitants Association, says the problem is of the state’s own making.

“I reference the Lizzy Borden defense. You know the poem. Gave her father forty whacks, gaver her mother forty-one and then she comes back and says ‘well I’m an orphan, have mercy’. Well this is the situation where the state created the problem.”

Maduff says the reality is that there is money in the pension funds and it’s time to tighten the belt.

“The answer is not ‘we don’t want to take responsibility’. I don’t know that anybody likes what the result is when one doesn’t take responsibility for one’s action. Typically you don’t like the consequences. We have a problem here and the state’s gonna have to find a way to to address it.”

Maduff says that’s gonna take time and the state can’t simply ignore their obligations.

Raoul: May be back to drawing board for pension reform

Meanwhile it may be back to the pension reform drawing board after a hearing at the State Supreme Court Wednesday, that’s according to one of the chief sponsor’s of the challenged pension reform law.

The justices’ questions and arguments gave some indication to State Senator Kwame Raoul that the law may be shot down and if that’s the case Raoul hopes the ruling can provide some guidance.

“That may or may not happen, hopefully it will. And then at that point we do have a huge challenge before us. Regardless of how this is resolved.”

Illinois’ pension funds face a one-hundred-eleven-billion dollar shortfall, something the challenged law would alleviated over several decades, if it’s upheld.

The law changes the cost of living allowance moving forward, but also proposed a funding plan to have the pensions fully funded over several decades.

Pensioner says underfunding is state’s own making

Dale Elenberger, a state retiree from a village just south of Springfield, said the state has done a poor job managing pensions. Elenberger, who worked for EPA, even pointed to pension holidays under former Governor Rod Blagojevich.

“They’d just use that money for something else. If I ran my household the way the state of Illinois has run the pension systems I’d be bankrupt.”

But Solicitor General Shapiro said that the state’s poor management in the past isn’t the only problem with the pensions.

“That is one of the factors, as I’ve said, that is relevant to the court’s ultimate determination on the merritts, but the evidence that’s in this case at this point shows that it is not purely a matter of the state’s own making.”

During oral arguments Wednesday Shapiro said that the Great Recession of 2008 and unexpected inflation made the problem much worse and the main reason why the pension reform law was justified.

The court is expected to rule on the case before the end of the current fiscal year.

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