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Illinois, unions to duel over pension cuts before state's high court

Illinois may be fighting an uphill battle on Wednesday in defending the constitutionality of a 2013 public pension reform law before the state supreme court.

Illinois justices will hear the state's appeal of a Nov. 21 county court ruling that tossed out the law. In the ruling, Sangamon County Judge John Belz drew on an unrelated state supreme court opinion that found the Illinois Constitution makes it "plain" and "unambiguous" that pensions cannot be reduced.

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The prior ruling, in a case involving retiree health care, essentially handcuffs the supreme court, said Max Schanzenbach, a professor at Northwestern University's law school. The state's highest court "had a chance to narrow the pension clause and they chose not to," Schanzenbach said.

In the current case, Illinois claims payments on its $105 billion unfunded pension liability are making it impossible to pay for core services like health care and public safety, which are "police powers" obligations also delineated in the state constitution. But labor unions and retirees challenging the pension cuts contend the constitution prohibits any reduction to retirement benefits.

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Mark D. Rosen, a professor at the Chicago-Kent College of Law, said the court must determine if there is an absolute need for the law, and whether the legislation reasonably addresses the need.

Rosen, who testified on the constitutionality of Senate Bill 1 before the legislature, said the need exists. "There is a pressing public need by virtue of the unfundedness," he said.

If the state prevails, the case would return to Sangamon County court for a ruling on whether a financial emergency exists, legal experts said.

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Illinois has the worst-funded pension system and the lowest credit ratings among all 50 states. Its chronic structural budget deficit worsened with the rollback of a temporary income tax increase on Jan. 1.

"If they find it unconstitutional, hopefully they will tell us what's wrong and why it's unconstitutional and inform us how we can perhaps find a bill that is constitutional," Illinois Senate President John Cullerton said on Monday.

If the law withstands a constitutional challenge, it would allow state pension contributions to drop by as much as $145 billion through 2045.

The reform law enacted in December 2013 reduces and suspends cost-of-living increases for pensions, raises retirement ages and limits salaries on which pensions are based.

The legal case has ramifications for Chicago, which is defending a 2014 state law that reset city pensions.