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* Let’s go through the decision together…
The solution proposed by the [state Constitution] drafters and ultimately approved by the people of Illinois was to protect the benefits of membership in public pension systems not by dictating specific funding levels, but by safeguarding the benefits themselves… The purpose of the clause and its dual features have never been in dispute
* Clear cut…
The first issue, whether Public Act 98-599’s reduction of retirement annuity benefits violates this State’s pension protection clause, is easily resolved. The pension protection clause clearly states: “[m]embership in any pension or retirement system of the State *** shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” (Emphasis added.) Ill. Const. 1970, art. XIII, § 5. This clause has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL 115811.We held in that case that the clause means precisely what it says: “if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired.”
This construction of article XIII, section 5, was not a break from prior law. To the contrary, it was a reaffirmation of principles articulated by this court and the appellate court on numerous occasions since the 1970 Constitution took effect. […]
Retirement annuity benefits are unquestionably a “benefit of contractually-enforceable relationship resulting from membership” in the four State-funded retirement systems. Indeed, they are among the most important benefits provided by those systems. If allowed to take effect, Public Act 98-599, would clearly result in a diminishment of the retirement annuities to which Tier 1 members of GRS, SRS, SURS and TRS became entitled when they joined those systems. As described earlier in this opinion, the new legislation directly reduces the value of retirement annuities for those members in no fewer than five different ways. While we presume statutes to be constitutional and must construe enactments by the legislature so as to uphold their validity whenever it is reasonably proper to do so (Wilson v. Department of Revenue, 169 Ill. 2d 306, 310 (1996)), there is simply no way that the annuity reduction provisions in Public Act 98-599 can be reconciled with the rights and protections established by the people of Illinois when they ratified the Illinois Constitution of 1970 and its pension protection clause. Those provisions contravene the clear requirements of article XIII, section 5, as set forth in the provision’s plain and unambiguous language and construed by the legion of cases we have just discussed. In enacting the provisions, the General Assembly overstepped the scope of its legislative power. This court is therefore obligated to declare those provisions invalid.
* Police powers…
That the annuity reduction provisions of Public Act 98-599 violate the pension protection clause’s prohibition against the diminishment of the benefits of membership in a State-funded retirement system is one the State has now all but conceded. After this court reaffirmed in Kanerva v. Weems that the pension protection clause means precisely what it says, the State shifted its focus to an argument it did not raise and we did not consider in Kanerva. The State’s position now rests on its affirmative defense that funding for the pension systems and State finances in general have become so dire that the General Assembly is authorized, even compelled, to invoke the State’s “reserved sovereign powers,” i.e., its police powers, to override the rights and protections afforded by article XIII, section 5, of the Illinois Constitution in the interests of the greater public good. This argument must also fail.
The circumstances presented by this case are not unique. Economic conditions are cyclical and expected, and fiscal difficulties have confronted the State before. […]
While these principles sound expansive, legislation impairing contracts has actually been upheld against contract clause challenges only rarely. George D. Hardin, Inc. v. Village of Mount Prospect, 99 Ill. 2d at 104. When the legislation has been directed at reducing pension benefits of State employees, this court has expressly held that it is “not defensible as a reasonable exercise of the State’s police powers” and declared it invalid under the contracts clause, as well as for other reasons. […]
In addition, because the state’s self-interest is at stake whenever it seeks to modify its own financial obligations, the United States Supreme Court has made clear that it is not appropriate to give the state’s legislature the same deference it would otherwise be afforded with regard to whether the impairment is reasonable and necessary to serve an important public purpose. “A governmental entity can always find a use for extra money,” the Court observed, “especially when taxes do not have to be raised. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.” […]
The State protests that this conclusion is tantamount to holding that the State has surrendered its sovereign authority, something it may not do. The State is incorrect. Article XIII, section 5, is in no sense a surrender of any attribute of sovereignty. Rather, it is a statement by the people of Illinois, made in the clearest possible terms, that the authority of the legislature does not include the power to diminish or impair the benefits of membership in a public retirement system. This is a restriction the people of Illinois had every right to impose. […]
Under the State’s reasoning, the only limit on the police power would be the scope of the emergency. The legislature could do whatever it felt it needed to do under the circumstances. And more than that, through its funding decisions, it could create the very emergency conditions used to justify its suspension of the rights conferred and protected by the constitution. If financial markets were rational, this prospect would not buoy our economy, it would ruin it.
* Man, is this ever a strong statement…
The financial challenges facing state and local governments in Illinois are well known and significant. In ruling as we have today, we do not mean to minimize the gravity of the State’s problems or the magnitude of the difficulty facing our elected representatives. It is our obligation, however, just as it is theirs, to ensure that the law is followed. That is true at all times. It is especially important in times of crisis when, as this case demonstrates, even clear principles and long-standing precedent are threatened. Crisis is not an excuse to abandon the rule of law. It is a summons to defend it. How we respond is the measure of our commitment to the principles of justice we are sworn to uphold.
We come, then, to the third and final issue presented by this appeal: are the invalid annuity reduction provisions of Public Act 98-599 severable from the remainder of the statute? […]
Among the 39 sections deemed “inseverable” are some of the specific provisions which impermissibly reduce retirement annuity benefits in violation of the pension protection clause. These include sections 2-119.1(a-1), 14-114(a-1), 15-136(d-1), and 16-133.1(a-1) (40 ILCS 5/2-119.1(a-1), 14-114(a-1), 15-136(d-1), 16-133.1(a-1) (West Supp. 2013)), which adversely affect the value of annual annuity increases. Under the express terms of section 97 of the Act itself, all 39 of the “inseverable” provisions must therefore fall with the provisions we have declared unconstitutional. When one eliminates those 39 provisions along with all the other annuity-reducing portions of the law that are void and enforceable under the pension protection clause, Public Act 98-599 all but evaporates.
Severability principles would doom the statute in any case. Under Illinois law, severability clauses are not conclusive. That is because a court’s authority to eliminate invalid elements of an act and yet sustain its valid provisions derives not from legislative fiat, but from powers inherent in the judiciary. The practice of holding statutory provisions severable from those that are found to be invalid originated in the courts long before severability clauses were adopted by legislatures. Although the use of severability clauses has now become common practice, we have noted that they are regarded as little more than a formality. […]
Applying these principles to the case before us, there can be no serious question that, with invalidation of those provisions of Public Act 98-599 which reduce the retirement annuities Tier 1 members of the GRS, SERS, SURS and TRS are entitled to receive, the entire statute must fall. As noted earlier in this opinion, the legislation’s proponents described its numerous provisions as “all part of an integral bipartisan package.” The overarching purpose of the law was to shore up State finances, improve its credit rating and free up resources for other purposes by reducing, i.e., diminishing, the amount of retirement annuity benefits paid to Tier 1 members of GRS, SERS, SURS, and TRS, particularly annual annuity increases, which the speaker of the House of Representatives himself referred to as the chief cause of the financial problems the Act was intended to address. 98th Ill. Gen. Assem., House Proceedings, Dec. 3, 2013, at 7 (statements of Representative Madigan). The annuity reduction provisions are therefore not merely central to the statute, they are its very reason for being. Without them, the legislature would not have enacted the law at all. To leave those remaining provisions standing once the core sections are stripped away would, under these circumstances, yield a legislation package that no longer reflects the legislature’s intent. The circuit court was therefore correct when it concluded that Public Act 98-599 is void and unenforceable in its entirety
No dissent was filed.
Done. Toast. Over.