Thursday, March 24, 2016
The Illinois Supreme Court today issued two opinions on state constitutional provisions as they relate to public employees' compensation. One went for the employees; the other went for the state.
In the first, Jones v. Municipal Employees' Annuity and Benefit Fund of Chicago, the court ruled that the state's effort to cut back on promised annuity payment increases under public-sector union contracts violated the state constitutional Pension Protection Clause. The case involved Public Act 98-641, which would have, among other things, cut the flat annual annuity increases under the contract in order to bring the funds back to solvency. Union members sued, arguing that the provision violated the state constitution's Pension Protection Clause, which says: "Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."
The court agreed. It said that the Clause means what it says--"shall not be diminished" really means "shall not be diminished"--and that Public Act 98-641 therefore violates it. The court rejected the state's arguments that the Act, when read as a whole, actually provides a net benefit to members and that the Act was part of a bargained-for exchange supported by consideration.
While Jones is a win for public employees, the other case, State of Illinois v. AFSCME, most certainly is not. In AFSCME, the state legislature failed to fund a promised 2-percent raise for certain government employees, even though that raise itself was a concession by those employees, who were entitled to a 4-percent raise under their contract. (In order to meet the state's fiscal crisis, the union and state agreed to a 2-percent raise on schedule, and a later, additional 2-percent raise, for a total of 4 percent--the contractual amount.) AFSCME took the case to an arbitrator and won, but the court reversed. The court said that the state constitutional Appropriations Clause overrode the agreement. That Clause reads: "The General Assembly by law shall make appropriations for all expenditures of public funds by the State." Moreover, an Illinois statute qualifies all public-sector collective bargaining with this language: "Subject to the appropriation power of [the legislature] . . . ." The court said that the Appropriations Clause and Illinois law together mean that the legislature can effectively override a promised contractual raise by failing to fund it.
Justice Kilbride dissented on this point. He argued that the legislature's failure to fund the 2-percent raise constituted a violation of the state constitution's Contract Clause.