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On the General Assembly’s “police powers”

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Illinois

* One of the arguments being made in support of Speaker Madigan’s pension reforms is that the General Assembly has certain “police powers” in the event of a crisis. The GA has long had the latitude to pass bills which, um, stretch the limits, shall we say, of the Constitution when a crisis is at hand.

The Illinois Supreme Court has addressed police powers in quite a few cases, and talked about that history just three years ago when ruling on a lawsuit that sought to overturn a comprehensive medical malpractice reform law…

In a related vein, the Attorney General posits that section 2–1706.5 is but one part of a massive “multidimensional” response to the health-care crisis which requires all interested parties–insurers, medical professionals and health-care consumers–to make tradeoffs and sacrifices. According to the Attorney General, the Act, through a number of interrelated measures, constitutes an equitable means of ensuring that everyone who stands to benefit from a resolution of the health-care crisis contributes to its resolution.

The Attorney General cites to the Workers’ Compensation Act (820 ILCS 305/1 et seq. (West 2008)) as an example of a multidimensional exercise of the General Assembly’s police power which, although modifying the common law, has been upheld by this court in a long line of cases. See Duley v. Caterpillar Tractor Co., 44 Ill. 2d 15 (1969); Moushon v. National Garages, Inc., 9 Ill. 2d 407 (1956); Grand Trunk Western Ry. Co. v. Industrial Comm’n, 291 Ill. 167 (1919); Matthiessen & Hegeler Zinc Co. v. Industrial Board, 284 Ill. 378 (1918). The Attorney General argues that section 2–1706.1, like the Workers’ Compensation Act, constitutes a legitimate exercise of the General Assembly’s police power.

* But the Supreme Court ruled against the police powers argument in the med-mal case. A couple of prominent medical malpractice defense attorneys penned this analysis…

The Lebron Court also addressed the argument posited by the State Attorney General in an amicus curiae brief that the legislation amounted to a proper exercise of the state’s police power because it appropriately balanced the benefits and burdens of resolving the health care crisis among multiple stakeholders, including insurers, health care providers and patients.

The Court was not persuaded. Instead, the Court noted that because it was not resting its decision on the special legislation analysis of Best, the fact that the act may have served to address a legitimate legislative goal or may have addressed that goal in a balanced and equitable manner would not cure the statute of the constitutional infirmity.

The Court also noted that while the legislature is permitted to alter the common law and change or limit available remedies, that power is not absolute and must be exercised within constitutional bounds. [Emphasis added.]

This is just one more reason to exclude judges from the pension bill because including them could easily prompt a separation of powers argument similar to the med-mal case.

But, more importantly, the Lebron decision gives opponents of Madigan’s pension bill a very powerful argument.

posted by Rich Miller
Friday, May 3, 13 @ 9:57 am

Comments

If the court says this map is Constitutional, they can say anything is Constitutional.

Comment by Just Me Friday, May 3, 13 @ 10:10 am
Handicapping how court’s will rule is tougher than picking a Derby winner.

Comment by wordslinger Friday, May 3, 13 @ 10:22 am
Maybe I’m missing something but I’m not getting the connection between this and the med mal case or how the same separation of powers argument would exist.

While judges and the courts have a role in setting damages and the legislature was trying to take that away in tort reform, judges don’t have any role in setting their own pay or benefits do they?

Also it seems to me that comparing the GA’s power to change the common law (which exists independently of laws made by the GA and dates back prior to the existence of the GA ) to the GA’s power to set pay/benefits as constrained by the 1970 constitution is a bit of an apples and oranges comparison.

Comment by hisgirlfriday Friday, May 3, 13 @ 10:24 am
This info has already been posted before, but …

The Illinois Constitution says that public pensions are contractual relationships whose benefits cannot be diminished or impaired.

The U.S. Constitution’s contract protection clause says that no state shall pass a law that impairs the obligation of contracts.

I am not an attorney. But, according to Westlaw, the most cited case about the U.S. Constitution’s contract protection clause and states powers is the case, U.S. Trust Co. of New York v. New Jersey, 97 S.Ct. 1505. In that case, the U.S. Supreme Court stated:

“Contract Clause of [U.S.] Constitution limits otherwise legitimate exercise of state legislative authority, and existence of important public interest is not always sufficient to overcome that limitation……..”.

also:

“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.”.

Additionally, the Illinois Supreme Court’s ruling from Jorgensen v. Blagojevich stated,

“No principle of law permits us to suspend constitutional requirements for economic reasons, no matter how compelling those reasons may seem.”.

Comment by Joe M Friday, May 3, 13 @ 10:29 am
As stated in the past, the sooner this entire issue gets to the Sup. Ct. with great counsel on both sides the better served will be the people of Illinois. It shouldn’t be doing nothing and wondering which door the tiger is behind. The sooner the better.

Comment by roscoe tom Friday, May 3, 13 @ 10:30 am
The bill might rely on grounds other than crisis. Even so crisis and economic reasons may not be the same thing. It might be worth keeping in mind JORGENSEN, v. BLAGOJEVICH, 211 Ill.2d 286 (2004) where the court said, “No principle of law permits us to suspend constitutional requirements for economic reasons, no matter how compelling those reasons may seem.”

Comment by Bigtwich Friday, May 3, 13 @ 10:34 am
Bigtwich, I’ve already posted that one in this context.

===I’m not getting the connection between this and the med mal case or how the same separation of powers argument would exist.===

It’s not the same argument, but it would involve separation of powers in that judicial pay has extra constitutional protections (Jorgensen).

Comment by Rich Miller Friday, May 3, 13 @ 10:36 am
As to how the court will rule - sadly I think it will be based on politics where our judges are elected in political campaigns. It just depends if the judges more fear union or mjm/business community backlash.

I

Comment by hisgirlfriday Friday, May 3, 13 @ 10:36 am
It’s shameful that Madigan and other politicians that voted to diminish retiree benefits have so much disregard for our state constitution, their oath of office, and the retired people of Illinois living on state pensions.

Comment by Meaningless Friday, May 3, 13 @ 10:39 am
One thing judges do best is simplify complicated arguments. Yeh, pension laws are complicated but the court will see through all the fluff (such as Madigan’s preamble) and rule SB1 unconstitutional. So the state is wasting more taxpayer time and money.

Comment by Soccertease Friday, May 3, 13 @ 10:48 am
I would think that an argument against the police powers would be that this “crisis” was of the GA’s own making.

If they are allowed to do this then they have the best job ever. In addition to being a part time job with full time pay and extensive “benefits”, whether ethical or not, the job of a GA member is even easier than that of a weatherman. Not only do you not have to be right in your decisions but if your poor decisions create disasterous results you get a mulligan, a do over, as it were.
This is why you don’t see legislators showing any real concern for the operation of the State. The ONLY time they show concern is when there isn’t enough money laying around loose for them to hand out to their cronies or use for their own self preservation.

My only hope for justice is that these folks some day realize that they are NOT looked up to and are not as revered as they think they are. And that many of them are thoroughly despised.

Comment by Irish Friday, May 3, 13 @ 11:14 am
Check out Felt, 107 Ill.2d 158 and Bardens, 22 Ill.2d 56. Police powers not enough.

Comment by RSW Friday, May 3, 13 @ 11:14 am
If we’re going to start seriously handicapping a major IL Supreme Ct decision, the way they do it in DC is to look at the Supremes justice by justice. Like MJM said, all you need is four votes. I’m very curious if that statement means, we’ll at least get it passed or if he has four specific current justices in mind. (Madigan’s probably happy to keep that ambiguous).

Comment by ZC Friday, May 3, 13 @ 11:14 am
If 4 Supreme Court judges do vote to uphold the pension reform law, their names will be prominently and forever linked to Magidan’s pronouncement that he is confident 4 judges will uphold the law.

Comment by Calico Jim Friday, May 3, 13 @ 11:17 am
There are a lot of arguments both ways on the outcome of any legal action. However, of all 50 states, Illinois has exemplified financial crisis. Now - whether that is by Legislative intent, Legislative error, Legislative goofs, or uncontrollable economic conditions will be the crux of arguments.

There are no sure things.

For me - I will be living as if 20% of my pension no longer exits. If that means having to earn more money with work - so be it. Prepare for the worst and hope for the best.

Comment by archimedes Friday, May 3, 13 @ 11:55 am
===I will be living as if 20% of my pension no longer exits===

How do you figure that?

Comment by Rich Miller Friday, May 3, 13 @ 12:04 pm
@ Rich - The AAI (COLA) over time will diminish the payouts. Those who planned on receiving the 3% compunded AAI will need to plan on living as if they are getting a reduced pension. Depending on the assumptions about life expectancy and such, a 20% reduction is not out of line.

Comment by titan Friday, May 3, 13 @ 12:09 pm
From the TRS website comes this example–

Right now, the average TRS pension is $48,216. With the current COLA that pension grows to $49,662 in the first year that member is eligible for a COLA and $51,152 in the second year. Under Senate Bill 1, a member with 30 years of service and a pension of $48,216 will see that pension grow by $900 to $49,116 in the first year the member is eligible for a COLA. In the second year, the member’s pension will increase by another $900 to $50,016.

Comment by Nearly Normal Friday, May 3, 13 @ 12:20 pm
Rich

I calculated about a 20% reduction over twenty years also. A result of both not compounding 3% AAI and lower base from years of service X $800 X 3%.

Comment by Very Old Soil Friday, May 3, 13 @ 12:39 pm
The Present Value of my pension (assuming I live to be 85) with the 3% on $1,000 for every year of service (the $1,000 limit does not increase, by the way, so it is effectively 3% simple if your pension is at or over the limit)compared to the 3% compounded increase on my entire pension is a 20% reduction.

This makes sense - if the early estimates are the Unfunded Liability is reduced by a little over 30% - then the Actuarial Accrued Benefits are reduced about 20% (since the funding level was a little under 50%). So, the value of earned benefits to date are reduced 20% with this bill.

Comment by archimedes Friday, May 3, 13 @ 12:47 pm
“The AAI (COLA) over time will diminish the payouts. Those who planned on receiving the 3% compunded AAI will need to plan on living as if they are getting a reduced pension. Depending on the assumptions about life expectancy and such, a 20% reduction is not out of line.”

I’m under SERS, with SS. MJM’s proposal will reduce my expected lifetime total pension payments by 12%. Some of the other bills would reduce it by 14% to 17%.

Comment by curmudgeon Friday, May 3, 13 @ 12:50 pm
I’m under SERS, with SS. MJM’s proposal will reduce my expected lifetime total pension payments by 12%. Some of the other bills would reduce it by 14% to 17%.

I should have included that I will be WELL over 67 when I can afford to retire, so the 5-year/age 67 delay in COLAs doesn’t affect me. Nor does the salary cap.

Comment by curmudgeon Friday, May 3, 13 @ 1:00 pm
At the risk of continuing on this:

Using Present Value discount of 2.5% (assume inflation of 2.5% per year) - retire at age 60, live to be 85 comparing present pension to the new bill:

Starting pension $35,000 PV reduced 13%
Starting pension $50,000 PV reduced 18%
Starting pension $75,000 PV reduced 22%
Starting pension $100,000 PV reduced 23%

Comment by archimedes Friday, May 3, 13 @ 1:21 pm
I posted this yesterday but because it has direct relevance to the current thread I repost it below:

For those of you wondering about the impact of the COLA cuts in the Madigan Bill that just passed the House, as a Finance professor proficient with spreadsheets and time value of money calculations I can offer the following:

In my case, retire at age 55, live to my life expectancy of 80, inactive member with 11 years under SURS, the bill diminishes the present value of my benefits over my expected lifetime by 21%. That calculation assumes a 7.75% discount rate (the same rate used to determine my benefit in the first place under the money purchase formula). Should the 7.75% discount rate be reduced, as suggested by the Madigan Bill’s proposed changes to how the effective rate of interest is set, then my initial monthly pension could also be substantially reduced and the total diminishment of my benefits would be far greater still, but I am gambling that this will not happen between now and my Dec. 1, 2013 retirement date.

However, people retiring 2-3 years from now or later will probably be affected by the effective rate of interest provision as well, and may well see diminishments in the 30-50% range. On the other hand, those retiring soon at higher ages like 60 or 65 may see somewhat smaller diminishments because they will collect the pension for fewer years, thus reducing the impact of the COLA cap.

Comment by Andrew Szakmary Friday, May 3, 13 @ 1:36 pm
Let’s all be careful to not mix apples, oranges, and kiwi here.

What folks have calculated here are compelling, real-life examples of how the bill is going to bite them in the wallet.
But take note that some have calculated on a cash basis, others have discounted the cash flows, some have considered the salary cap, etc, etc, etc.
There are too many moving parts to this to make any broad generalizations about impact, beyond the obvious COLA impairment. It’s best to crunch your own numbers or find a friend who is good with Excel, or in AA’s case, an abacus.

Comment by Arthur Andersen Friday, May 3, 13 @ 2:03 pm
For those of us losing the first 5 years of COLAs (4.5 in my case) then the reduced COLA and then suddenly having to pay 4% of our pension to insurance, the cuts are what I would call draconian.

Comment by Liberty Friday, May 3, 13 @ 2:06 pm
Felt Case- Illinois Pension Case Law Handbook: from SJR

“One of the named plaintiffs in this case, James Felt, showed that upon his retirement, the new computation would cause him to lose $3,187.44 in annual benefits. The state countered that its police power allowed it to impair contracts where the impairment was insubstantial and the state’s interest was compelling - in this case ensuring the fiscal viability of its underfunded judicial pension system.”

“While recognizing the state’s legitimate interest in ensuring the fiscal viability of its pension systems, the Illinois Supreme Court nonetheless struck down the legislation as an unconstitutional diminishment of a pension benefit. In the process, the Felt Court rejected every single argument the state made. Indeed, the court maintained that doing otherwise would ignore the plain language of the Illinois Constitution, overrule prior Illinois Supreme Court decisions and run counter to the clear intent of the drafters of the Illinois Constitution. As to this last point, the Supreme Court cited an explanation of Article XIII, Section 5 given by its author in the Record of Proceedings from the 1970 Constitutional Convention. That explanation plainly stated the intention of the provision was to prohibit the state from ‘changing the terms of’ or ‘lessening’ the pension benefits payable to workers’ ‘after they have embarked upon employment.’”

Link to State Journal Register article:

http://www.sj-r.com/thedome/x1…

Comment by Liberty First Friday, May 3, 13 @ 2:21 pm
===One of the arguments being made in support of Speaker Madigan’s pension reforms is that the General Assembly has certain “police powers” in the event of a crisis.===

….Even if the GA has created the crisis?

Comment by veritas Friday, May 3, 13 @ 2:31 pm
Question: When this makes it to the Illinois Supreme Court and they rule in favor of the state workers, I see it’s probably the end of the line for some of the proposals. But if they rule in favor of the State, do you think there is a path to the US Supreme Court for the employees due to the contract impairment clause?

Comment by mid-level Friday, May 3, 13 @ 3:24 pm
Our conservative friends regularly rail against liberal construction of the constitution. They call for strict construction based upon the intent of the framers. When it comes to the pension clause, however, many Republicans now want loose interpretation that permits emasculation of the clause based upon the police power.

In short, they want to have it both ways: Strict construction of the clauses they like, such as the gun-rights provision, and loose construction of clauses they find inconvenient.

Comment by reformer Friday, May 3, 13 @ 4:27 pm