3
Many similarities between Arizona and
Illinois when it comes to pension case
We’re still waiting for the
pension reform lawsuit to be
heard in Illinois, but there was a
very interesting out-of-state
development on February 20
th
when the Arizona Supreme
Court overturned that state’s
pension reform legislation. The
similarities between Arizona
and Illinois are striking, including:
The pension protection language in both
states’ constitutions is virtually identical.
the future cost of living adjustments
(COLAs) for judges and elected officials.
The Arizona ruling made it clear that the
COLAs – referred to as Automatic Annual
Increases (AAI) in the Illinois legislation –
going forward are a contractual benefit
already earned as opposed to a yet-to-be-
earned future benefit.
One of the reasons cited for Arizona
legislators cutting pension benefits was
the poor shape of that state’s budget.
Sound familiar?
It’s understood that the Arizona ruling has no
direct impact on how the Illinois Supreme Court
ultimately will decide the fate of Senate Bill 1. For one
thing, this is Illinois, and, unlike in Arizona, Supreme
Court justices are elected in Illinois, so the politics
cannot be ignored.
But while the Arizona decision may not count as
judicial precedent in Illinois, it certainly must be taken
into consideration given the similarities in the two
states -- particularly the pension protection language
mirrored in the state constitutions. The Arizona
Supreme Court decision was unanimous; not a single
justice dissented. So what are the odds a majority of
Supreme Court justices in Illinois would reach the
opposite decision?
Some proponents of SB 1 have said that the fact
Illinois has worse budget problems than Arizona
could be a factor. But it’s hard to imagine that such a
landmark decision would be based on a fiscal
snapshot in time, and legislators and politicians
would be able to use their self-inflicted budget
problems to circumvent the constitution.
A statement from Hank Kim, Executive Director
and Counsel for the National Conference on Public
Employee
Retirement
Systems
(NCPERS),
addressed that very issue.
“The justices correctly rejected the state
retirement system’s argument that the benefit
reduction was financially necessary and that the
traditional federal impairment of contract test –
balancing the contract against public necessity –
should apply. The justices found instead that the
pension clause of the Arizona Constitution was
intended to add an
additional
measure of protection
to pension benefits. Even more important, the high
court found that the term ‘benefit’ includes the
formula by which future payments will be calculated,”
Kim said.
We’ll have to wait and see how it all plays out in
our state, and that might take a while. The Arizona
case took more than two years to be resolved.
The Illinois Supreme Court on March 3 ruled
that the four pension lawsuits that have been filed to
date, including the lawsuit filed jointly by the Illinois
Retired Teachers Association and IASA, will be
consolidated and that the case will be heard in
Sangamon County. No date has been set yet for the
case to be heard.
Message from the
Executive Director
Dr. Brent Clark
It is expected that the Illinois Supreme Court even-
tually will rule on the constitutionality of Senate Bill
1, Illinois’ pension reform law. The current Illinois
Supreme Court includes, from left, Anne M. Burke,
Thomas L. Kilbride, Charles E. Freeman, Chief Jus-
tice Rita B. Garman, Robert R. Thomas, Lloyd A.
Karmeier, and Mary Jane Theis.
