An Illinois judge ruled Friday that a law intended to fix the nation's worst state employee pension crisis violates the state constitution, deciding in favor of state employees and retirees who sued to block the landmark overhaul.
The overhaul had been approved by lawmakers and Democratic Gov. Pat Quinn last year. Years of underfunding had put the state's pension systems roughly $100 billion short of what they need to cover benefits promised to employees.
The office of Attorney General Lisa Madigan said in the statement they plan to appeal the decision.
“We plan to immediately appeal the decision to the Illinois Supreme Court so that we can obtain a final resolution of these important issues and allow the Governor and General Assembly to take any necessary action," the statement read. "We will ask the Court to expedite the appeal given the significant impact that a final decision in this case will have on the state’s fiscal condition.”
Quinn's office released a statement saying it anticipated legal challenges and would urge the Illinois Supreme Court to take up the matter quickly.
"We're confident the Illinois Supreme Court will uphold this urgently needed law that squarely addresses the most pressing fiscal crisis of our time," Quinn spokesman Grant Klinzman said in a statement.
If the ruling by Sangamon County Circuit Judge John Belz is upheld, lawmakers would have to go back and come up with another plan.
“I have long believed there is a constitutional way to confront Illinois’ pension challenges," Senate President John Cullerton said in a statement Friday. "Today’s ruling confirms that, while the need for reform is urgent, the rule of law is absolute. I remain committed to working with all parties to address our budget pressures and pension problems in a manner consistent with the Illinois Constitution.”
That would be yet another financial challenge for the incoming Republican governor, Bruce Rauner, who takes office in January and opposes the current pension law.
Rauner on Friday said the ruling is "the first step in a process that should ultimately be decided by the Illinois Supreme Court."
"It is my hope that the court will take up the case and rule as soon as possible," Rauner said in a statement. "I look forward to working with the legislature to craft and implement effective, bipartisan pension reform.”
The overhaul reduces benefits for retirees to significantly cut the debt, but also reduces employee contributions. The lawsuit said the constitution prohibits reducing benefits or compensation once they're promised.
Illinois argued that pensions are a "contractual agreement," which the government may modify, particularly in a crisis. In this case, it said the state faced a fiscal emergency.
"The court held today, as our unions have long argued, that the state cannot simply choose to violate the constitution and diminish or impair retirement benefits if politicians find these commitments inconvenient to keep," said a statement from We Are One Illinois, a coalition of unions opposed to the pension overhaul.
While litigants initially didn't think the case would be settled before 2015, Belz said in September he'd like to quickly move any challenge over the pension overhaul to the Supreme Court.
His action follows a July Supreme Court ruling that requiring state retirees to pay more for health insurance was unconstitutional. Belz had called that ruling "an elephant in the room," increasing speculation that the pension overhaul could suffer the same fate.