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Pensions and the Kanerva Case
By Linda Brookhart, Executive Director, SUAA

As you by now know, the State of Illinois is in a financial crisis and has responded by declaring war on public pensions. This has included several legislative actions. In 2012, Governor Quinn signed SB 1313 into law. That measure started requiring SURS annuitants, among others, to start paying a portion of their health insurance premiums, something that the State had long since promised as part of their pensions. In 2013, he signed SB1 into law which went directly at the heart of pensions by attacking the automatic annuity increases, retirement age, annuity formulas, the effective rate of interest and other things.

The Kanerva case was filed to challenge the constitutionality of SB 1313, asserting that it violated Pension Protection Clause of the Illinois Constitution. The case was immediately dismissed by the Sangamon County Court which found that the health care benefits were not part of pensions. That ruling all but eliminated any hope of protecting health benefits of retirees.

Meanwhile, SUAA and others filed similar actions challenging the constitutionality of SB1. Those cases were not dismissed, but the State has argued both that some of the items challenged (such as the changes to the automatic annuity increases) do not constitute "pension" benefits at all, and that it can violate the Pension Protection Clause for the greater good of the citizens of Illinois-the so called "police powers" argument. SUAA and the other Plaintiffs in those actions filed an immediate motion for judgment on the basis of the pension clause asserting that the police powers cannot be used to void the constitutional protections of the Pension Protection Clause. The Sangamon County Court put that motion aside to permit the State to bring forth its evidence supporting its exercise of the police powers. That constituted a significant stall in the fight against pension reform.

On July, 3, 2014, the Supreme Court of Illinois reversed the trial court in the Kanerva case. In so doing, it breathed new life into a losing fight. Some have even gone so far as to claim that the war is over. That, unfortunately, is far from true. The Kanerva opinion is limited to a determination that health coverage is a pension benefit. It does not address the police powers defense at all. And obviously it does not address it in the context of the pension case.

Still, the Kanerva opinion provides some language which is very useful. First, it provides that the term "pension benefit" is expansive, covering all benefits that are "conditioned on membership in one of the State's various public pension systems." That bodes very well for the Plaintiffs in defeating any argument the State may make that the automatic annuity increases are not "pension benefits." Indeed, even the dissent notes that Kanerva would be a different case if the health benefits were in the same code section as the pension benefits. In this case, all of the benefits at issue are in the pension code itself.

In the short run, the Kanerva decision is a big boost for the fight against pension reform. But there remains a long fight ahead. It may well be a turning point but it is not the end of the war. This is not the time for public employees to sit on their laurels, but rather a time to take advantage of momentum and buckle down for the fight.