Illinois justices overturn state's landmark 2013 pension law

SPRINGFIELD, Ill. (WLS) -- The Illinois Supreme Court ruled Friday that pension reform signed into law in 2013 is unconstitutional. Gov. Bruce Rauner and the legislature must now return to square one in crafting a workable pension plan.

The court said public worker pension benefits are not only untouchable, but that current employees are guaranteed to work their entire careers under the same system in place on the day they were hired.

"Frankly, if Illinois were a corporation, it would probably need to file bankruptcy," said Gov. Bruce Rauner.

Rauner - who spoke to a corporate event in Chicago - said months ago he thought the Supreme Court would throw out the pension reform law worsening the state's already worst-in-the-nation, $110 billion unfunded pension debt.

"We cannot afford to have 25 cents, one fourth of every dollar, from the taxpayers go to pensions. We just can't do that," Rauner said.

The court ruled on a lawsuit filed by unions. It cited a clause in the state constitution that says public worker pensions - including teachers, nurses, police and firefighters - may not be diminished or impaired even if there is a fiscal crisis.

"The court said look, you cannot undo the constitution when it might be convenient," said Dan Montgomery, Illinois Federation of Teachers.

Virtually every unit of government in Illinois that offers an employee pension is affected by the ruling. Mayor Rahm Emanuel - who negotiated a pension deal with half the city's workforce last year - is holding out hope that settlement can survive.

"The state never worked with their labor partners. We worked with our labor partners and that's a fundamental difference," Emanuel said.

For state lawmakers, the ruling means back to the drawing board on pension reform - with only three weeks left in the regular legislative session.

The Illinois Policy Institute says the existing pension should not be available to future public workers.

"What can be done is to put all new employees into a 401k type system where they pay into their own accounts," said Jacob Huebert, Illinois Policy Institute.

And the governor wants a 2016 referendum vote to amend the state constitution to change the benefits to be earned by current employees in the future.

"We'd rather do a constitutional referendum and try to clarify that benefits earned should be protected but the future is unknown and it can be higher or lower," Rauner said.

The state general assembly has about three weeks left in its regular session. Paying next year's pension bill is critical to balancing the 2016-17 budget.

Finally, we should note that virtually every unit of government in Illinois is affected by Friday's Supreme Court ruling. Many, if not all of them, have a level of unfunded pension debt.