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Illinois attorney general seeks expedited hearing on pension law

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Illinois Attorney General Lisa Madigan's office is seeking an expedited state Supreme Court hearing on the state's 2013 pension law after a lower court ruled last month the law was unconstitutional.

A motion filed by Ms. Madigan's office Thursday requests oral arguments start as early as Jan. 22 and no later than March 10. Ms. Madigan's office appealed that decision to the Illinois Supreme Court on Nov. 26.

A prompt ruling is critical “because the state must either implement the act, or, in the alternative, significantly reduce spending and/or raise taxes,” the motion states.

The law is aimed at bringing the state's retirement systems to full funding and reducing contributions by roughly $145 billion over the next 30 years by lowering cost-of-living adjustments, capping pensionable salaries and raising retirement ages.

The law was signed by Gov. Pat Quinn on Dec. 5, 2013, with a June 1 effective date but was put on hold by a circuit court judge until its legality was decided.

If the law is upheld, state pension contributions in fiscal year 2016 could be reduced by roughly $1 billion. The state's budget process for fiscal year 2016 ends May 31, 2015.

On Nov. 21, Judge John Belz sided with employee and retiree organizations that argued the law violates the state's constitutional clause that pension benefits “shall not be diminished or impaired.”

Ms. Madigan's office maintains that pension benefits are a contractual relationship that can be modified in times of crisis and that the Illinois' precarious finances qualify as a crisis.

Judge Belz rejected that argument in his November ruling. “The pension protection clause contains no exception, restriction or limitation for an exercise of the state's police powers or reserved sovereign powers,” he wrote.

Illinois' five state retirement systems had an aggregate funded status of 42.9%, the worst in the country, and a combined unfunded liability of $104 billion, as of June 30, according to a report from the state Commission on Government Forecasting and Accountability.

Meaghan Kilroy writes for Pensions & Investments, a sister publication of Business Insurance.

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