Including healthcare liabilities, which the court recently decided are constitutionally protected along with pension benefits, the reform bill at issue would reduce unfunded liabilities by only 12%.
By: Mark Glennon*
Illinois needs a reminder about what kind of supreme court it has.
Pundits and politicians from both parties, including Governor-elect Rauner, regularly express hope that if the Illinois Supreme court strikes down SB1, the pension reform bill from 2013, it at least will provide “guidance” on what kind of reform it would find acceptable. They apparently presume the court will act in a legally principled manner to help the other branches of government address the pension crisis.
Don’t count on it. The Illinois Supreme Court is a political institution that’s perfectly comfortable ignoring legal principle, other branches of government, statutes, the constitution, and pension problems to get the results it wants. And it does not want pension reform. If you think that’s exaggeration, consider what we learned from attempts at tort reform and what the court has already done recently on pensions:
The tort reform lesson. The Illinois legislature tried, tried and tried again to limit non-economic damages in certain tort claims in a manner the court would find acceptable, only to have the court make up new impediments each time. Three different bills have been struck down by the court, though each was drafted based on guidance that earlier rulings are supposed to provide. Reformers have now given up. As one commentator put it, “At this point, if Illinois wants to put the voters and their representatives back in charge, it will need either to alter its constitution or–perhaps a better idea–alter the composition of its supreme court.”
As if for the purpose of insulting the legislature, the court’s rationale for invalidating a cap on non-economic damages was separation of powers. Only the court has the power to limit those damage claims, they said. “We make the law around here” — that’s a fair summary of the court’s decision in the most recent of those three decisions. The rationale the court used, as a dissenting opinion documented, “has not only been rejected by the federal courts, it has failed to carry the day in any reported decision in any other state in the United States.”
The court is dragging out review of SB1 unnecessarily. Courts can move very, very rapidly when they want. The Bush v. Gore dispute over the November 7, 2000 presidential election went through three Florida courts, was fully briefed and argued before the U.S. Supreme Court, and disposed of with a written opinion by that court on December 12 of that year — less than five weeks, start to finish.
Under the “expedited” schedule set by the Illinois Supreme Court for SB1, oral arguments will be in March and a decision will come after that, probably before May 31.
That’s far longer than necessary. Remember that no facts are in dispute on this appeal and there is no trial record to go over; only a pure legal issue is on the table. The appeal is from a ruling on the pleadings that, as a matter of law, the state cannot raise any defenses to the constitutional pension protection clause. To state the question differently, can the state even bring up the “police powers” defense that it’s too broke to pay the pensions? That question was already briefed and argued by both sides at the lower court that ruled against SB1 on November 21. The law was passed in December 2013. Lawyers don’t need months of revisions to their previous work, and there is nothing remotely as pressing in Illinois.
And remember that if the Illinois Supreme Court rules in favor of SB1, the case goes back to the trial court for what will surely be a tedious trial on the facts, including expert testimony about whether the state is indeed too broke to pay the pensions. After that trial is conducted, the ruling almost certainly would be appealed again on other issues. Ultimate resolution easily could be over a year away, perhaps much longer. Implementation of the law is stayed pending all that.
The recent Kanerva decision told us the court doesn’t care what the law is, and that it doesn’t like pension reform. In July, with the stroke of a pen, the Illinois Supreme Court increased the official unfunded pension liability by 50% — $56 billion — by ruling that healthcare benefits are protected along with pensions under the constitution. The court had zero basis for that ruling. Healthcare, insurance, and benefit supplements are not even mentioned in the constitution. The sole dissent ridiculed the majority opinion for that reason. The court simply made up a constitutional right for public retirees. No state court has ever unilaterally created so large a financial burden on its legislature that I can think of.
In dicta in the Kanerva opinion, the court also told us what it thinks of pension reform and the police powers defense. The pension protection clause was aimed, the court said, at “protecting the right to receive the promised retirement benefits, not the adequacy of funding to pay for them.”
A paradox makes it particularly easy for the court to kill pension reform. The paradox is that a conservative judicial philosophy suggests that the police powers defense should be rejected and SB1 invalidated. A strict constructionist would say the constitution states plainly that pension benefits cannot be cut, so that’s it — amend the constitution if you want it changed. Also, accepting the police powers argument probably would lead to years and years of judicial activism. The defense would require trials on the facts not just on the state’s budget, economy, capacity for higher taxes and competing budget items, but on those for each city that tried pension reform. The court could easily base its decision on plain wording and avoidance of judicial activism — a very reasonable position as we explained earlier.
Alternatively, because of that issue of judicial activism, if the court wants to deliberately jack around pension reformers, upholding SB1 might be the best way. After all, SB1 would only reduce the unfunded pension liability by about 12%. Implementation would be stayed while the court sends it back for trial. When the trial court decision is rendered and appealed, new issues arising from the trial would likely give the court additional ways it could invalidate the bill.
One of my favorite movie scenes is in Mars Attacks! After an initial encounter where they shoot up some earthlings, the Martians laugh while they sit in their spaceship watching a broadcast to them by the president saying it was all a big “misunderstanding,” and asking for another meeting. The Martian leader feigns regret with teary eyes in their next encounter, and of course proceeds with another attack.
OK, that’s too cynical. Our justices aren’t evil Martians. But I do think about that scene when I envision Illinois Supreme Court judges watching reformers say they hope the court will provide “guidance” about how to cut pensions.
Illinois eventually will cease to operate as a state unless it makes large cuts to benefits already accrued on the fattest pensions, and judges’ pensions are among the fattest. (Reasonably sized pensions for those who really need them, however, should be protected.) The Illinois Supreme Court will not give guidance on how to accomplish that.
*Mark Glennon is founder of WirePoints and formerly practiced law.