As bad as Illinois’ fiscal outlook is now, it’s hard to imagine it getting any worse.
But not only can things get worse, they’re headed in that direction after last week’s ruling by the Illinois Supreme Court.
In a 6-1 decision, the state’s highest court said that a 2012 law allowing the state to collect premiums from retirees for their state-subsidized health care violates the Illinois Constitution. Prior to the 2012 law, state workers who retired with 20 or more years of service were entitled to premium-free health insurance.
Justice Charles Freeman, writing for the majority, said that health insurance premium subsidies are part of a contractual relationship with retirees that can’t be diminished under the Constitution.
“Giving the language ... its plain and ordinary meaning, all of these benefits, including subsidized health care, must be considered to be benefits of membership in a pension or retirement system of the State and, therefore, within that provision’s protections,” Freeman wrote.
This is the first of what will be several Supreme Court decisions on lawsuits challenging recent changes to the benefits that state retirees and future retirees receive. In addition to the health premium change, lawmakers last year passed pension reform legislation that, among other things, reduced the compounded, 3 percent cost-of-living increases that retirees receive.
We didn’t think those reform measures went far enough, but if last week’s ruling is any indication, the Supreme Court is likely to strike them down, as well.
If that’s the case, the state faces dire consequences.
Illinois’ five public pension systems are underfunded by more than $100 billion, and the state’s pension obligations take up 20 percent (and climbing) of its annual budget.
If significant changes aren’t put into effect soon, one of two things can happen:
There either won’t be enough money to pay benefits at some point in the future, meaning retirees will lose a lot more than health insurance subsidies and overly generous COLA increases; or Illinois’ already over-burdened taxpayers will be hit up for even more, sending more people – and jobs – to other states, putting even more of the obligation on remaining taxpayers.
Either scenario is a recipe for fiscal disaster.
But, much like Gov. Pat Quinn and the General Assembly, it appears the Supreme Court will keep us on that path.