Chicago pensions plan struck down by Illinois Supreme Court

A win for government employees, not for taxpayers. That's the bottom line of an important new ruling Thursday by the Illinois State Supreme Court.

The court killed a pension reform law that could have saved Chicago taxpayers billions of dollars. But it would have also slightly reduced retirement benefits for some city workers and the court said that's not legal. The ruling applied to two Chicago government pension funds. But here's what it means to taxpayers all over Illinois. We're now on the hook for every penny of government employee pensions statewide. And the bill is truly mind-boggling.

"There probably has to be tax increases on the table," said Ralph Martire of the Center for Tax & Budget Accountability.

Public pension expert Martire's assessment may be the understatement of the year, now that Illinois's Supreme Court has slammed the door on virtually every attempt to achieve big reductions in public employee pension costs. Those crushing costs are why the City of Chicago's credit rating is below junk status.  The State of Illinois is ranked just three steps above junk.

Illinois taxpayers owe $111 billion in unfunded public employee retirement pensions and health care. Moody's credit raters say Chicago taxpayers owe $75 billion.

Rejecting every big attempt to reduce that burden, the Supreme Court's pointed to one sentence in the Illinois Constitution, reading: State "pension or retirement...benefits...shall not be diminished or impaired."

Governor Rauner and top officials at City Hall have quietly discussed amending the Constitution to get rid of that so-called "public pension clause." 

"At least then there'd be leeway to make some needed adjustments so the state doesn't just totally run out of money," said Jacob Huebert, Attorney Liberty Justice Center.

Others insist that even if the Illinois Constitution were changed, retirement benefits of current state employees could not be cut.

"It would only apply going forward. It would do nothing to deal with the extant debt," Martire said.

Amending the constitution would also require Republican Governor Rauner and the Democratic-controlled General Assembly to work together, something that right now seems a pipe dream.  Eventually, though, big tax increases are coming.