An Illinois state court judge on Wednesday agreed to temporarily halt the June 1 effective date of state pension overhaul legislation passed last December.
Five lawsuits challenging the constitutionality of the pension changes have been consolidated in the Sangamon County Circuit Court. The We Are One Illinois Coalition asked the court, in the state capital of Springfield, to delay implementation of the changes until the legal challenge is settled. The coalition made the request in a motion filed this week seeking a temporary restraining order and preliminary injunction to stay the legislation.
On Wednesday, Sangamon County Circuit Court Judge John Belz granted the request to temporarily block the implementation date. The coalition and state did not immediately release statements.
"The fair and proper thing to do is not to allow this legislation to cause any damage until the courts have spoken on its constitutionality," Michael Carrigan, president of the Illinois AFL-CIO, said in a coalition statement announcing the request. "Otherwise, teachers, first responders, nurses, and other state and university employees and retirees will be irreparably harmed."
The motion argued that the harm to pension system members and the pension systems themselves will be immediate without an injunction while delaying implementation of the changes would not immediately impact the state's fiscal situation. Belz agreed in his order.
"To the extent that the act purports to fix pension system funding issues, that fix is implemented over a long term. The State admits in its recent budget projections that no savings would be realized from the act until fiscal year 2016," the filing says. Gov. Pat Quinn has delayed incorporating any savings into his proposed budget due to the legal challenge.
The case is ultimately expected to be decided by the Illinois Supreme Court. The lawsuits argue that the changes violate the state constitution's provisions giving contract status to pension benefits and protecting them against impairment or from being diminished.
The state counters that the legislation provides "consideration" for the negative changes by stabilizing the pension system and reducing employee contributions.
The legislation limits cost-of-living increases, caps pensionable salaries, and raises the retirement age for some while cutting employee contributions by 1%, shifting contribution calculations to a more actuarially sound method, and gives the pension funds enforcement rights over state payments.
Most of the lawsuits name the state, Gov. Pat Quinn, other constitutional officers, and the pension funds as defendants. Union officials believe the total class of active and retired members of the retirement system impacted may be around 621,000.
Much of the expected savings from the pension overhaul stem from the COLA increases annuitants now receive. Illinois likely will argue that those automatic increases are not constitutionally protected.
Rating agencies have said the state's weak credit rating could stabilize if the pension changes are eventually upheld and the state shores up its budget by extending a temporary income tax. Quinn has proposed making the temporary 2011 income tax hike permanent but lawmakers have not yet voted on the tax rates or the proposed budget.
The state is rated at the low single A level — the lowest among states — with two assigning a negative outlook and one a "developing" outlook.