Crain’s New York had a good piece yesterday on efforts in New York to amend its state constitutional pension protection clause. Our clause is modeled on New York’s.
The primary issue is that even if you amend the state constitution to allow benefit cuts, the Contracts Clause in the United States Constitution still forbids states from passing any “law impairing the obligation of contracts.” Legal opinions differ on whether that clause would allow for benefit cuts as the article explains.
That’s critical because cutting unfunded pension liabilities means cutting pension benefits, which Illinois courts won’t allow under our pension protection clause. If a state constitutional amendment won’t work, that leaves bankruptcy as the only means to significantly reduce unfunded pension liabilities of the State of Illinois and its municipalities.
Other state constitutions vary on their level of pension protection, as the article describes briefly.
-Mark Glennon is founder of Wirepoints. Opinions expressed are his own.