Illinois AG Says Pension Funding Shift Legal

July 5, 2005 ( - Illinois lawmakers followed the rules when they passed legislation slashing state contributions to government pension plans, at least in the opinion of state Attorney General Lisa Madigan.

State Treasurer Judy Baar Topinka has challenged the move, arguing that bills that increase state debt must be approved by three-fifths of lawmakers, not a simple majority, according to the AP.   However, Madigan says that the pension cuts are not the same thing as a formal increase in state debt.  

“Although the reduction in state contributions is likely to necessitate funding increases in later years, the amount owed in the form of benefits to participants has not been increased,” she wrote in an opinion released Friday. “Therefore, the State has not ‘incurred’ any additional debt as that term is used in” the state constitution.

Lawmakers voted in May to cut pension contributions by about $2.3 billion over the next two years – a change that won’t affect retiree benefits, but it will cost the state more money in the long run (see  Illinois Budget Pact Diverts Pension Dollars ).   The plan to balance the state budget was backed by the governor and Democratic legislative leaders, including Madigan’s father, House Speaker Michael Madigan.

Constitutional Questions

State Treasurer Judy Baar Topinka, a Republican, had sought the attorney general’s opinion on the matter, contending that the budget measure violated the Illinois Constitution in three areas, according to the Peoria Star-Journal:

  • It should have required a three-fifths approval vote in the legislature because it causes the state to incur debt.
  • It illegally diminishes employee pension benefits.
  • It improperly overrides provisions of the contract with the state’s largest employee union, which requires state pension contributions.

To help solve an immediate fiscal crisis, the governor and Democratic leaders of the state House and Senate devised a plan to defer $1.2 billion from state pension systems for the current fiscal year and $1.1 billion during the next fiscal year.   The legislation passed both legislative chambers by narrow margins, with nearly all of the Democrats supporting it and every Republican voting against it (see  Illinois Dems Push Through Pension Diversion Budget ).

However, Madigan, a Democrat, also noted that her opinion on the legality of the budgetary move “in no way implies that (the legislation) will be fiscally prudent.”

As for Topinka’s second question, according to the Peoria (Ill) Journal Star, Madigan said the Constitution “only protects benefits; it does not control funding.” Benefits for pension recipients will not change under the legislation, she stated.

According to the Journal Star, Madigan also said the legislation does not violate state government’s contract with the American Federation of State, County and Municipal Employees because “the State is continuing to make the employer’s contribution to the retirement systems, albeit in a reduced amount.

The Star notes that in a written statement, Topinka, the only Republican statewide officeholder, responded, “While I appreciate the attorney general’s careful review of this issue, I still believe that if we are spending more money than we taking in, we are racking up state debt.”