Breaking news:
The Illinois Supreme Court ruled today that subsidized health care premiums for retired state employees are protected under the Illinois Constitution, signaling potential trouble for an overhaul of pension benefits that’s also being challenged in court.
The 6-1 decision centers around a 2012 law that allowed the state to charge retired workers for health care insurance premiums, which many did not have to pay depending on how long they worked for the state.
Retired workers sued, arguing the changes violated a provision in the state constitution that declares pension benefits “shall not be diminished or impaired.” Attorneys for the state argued the constitution did not specifically declare health care benefits were protected.
Look, not to get into the merits of the non-diminishment clause, but it presents a formidable obstacle to those who want to change the pension system in ways that save the state money.
It's been a good week for constitutional hurdles -- first the citizen initiated referendums got nixed in a lower court, now the state Supremes shoot down pension reform.
Is "reform" a neutral term? I get a little twinge whenever I type it, as it certainly seems to carry with it a sense of positive change and therefore suggests that those who oppose the change are objectively wrong.
UPDATE .. The back and forth between the majority and dissenting Justice Anne Burke is interesting.
Majority:
In this case, plaintiffs contend that, by eliminating the statutory standards in the prior version of section 10 of the Group Insurance Act and requiring annuitants and survivors to contribute additional amounts toward the cost of their health care, Public Act 97-695 has diminished or impaired this retirement system membership benefit, in violation of the pension protection clause. Defendants respond by asserting that State contributions to retiree health insurance premiums, which are not codified in the Pension Code and are not paid from the assets of the retirement funds established in the Pension Code, are fundamentally different from pension annuities and, therefore, are not included within the protections afforded by article XIII, section 5.
Article XIII, section 5, provides that “[m]embership in any pension or retirement system of the State *** shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” Ill. Const. 1970, art. XIII, § 5.
Under the language of this provision, which was based on a nearly identical provision of the New York Constitution (see Felt v. Board of Trustees of the Judges Retirement System, 107 Ill. 2d 158, 163 (1985); Kraus v. Board of Trustees of the Police Pension Fund, 72 Ill. App. 3d 833, 845 (1979)), it is clear that if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired.
Thus, the question presented is whether a health insurance subsidy provided in retirement qualifies as a benefit of membership.
As noted above, Illinois law affords most state employees a package of benefits in addition to the wages they are paid. These include subsidized health care, disability and life insurance coverage, eligibility to receive a retirement annuity and survivor benefits. These benefits were provided when article XIII, section 5, was proposed to Illinois voters for approval, as they are now.
Although some of the benefits are governed by a group health insurance statute and others are covered by the Pension Code, eligibility for all of the benefits is limited to, conditioned on, and flows directly from membership in one of the State’s various public pension systems.
Giving the language of article XIII, section 5, its plain and ordinary meaning, all of these benefits, including subsidized health care, must be considered to be benefits of membership in a pension or retirement system of the State and, therefore, within that provision’s protections. See Duncan v. Retired Public Employees of Alaska, Inc., 71 P.3d 882, 887 (Alaska 2003) (giving comparable provision of Alaska Constitution “its natural and ordinary meaning,” there “is little question” that it encompasses “health insurance benefits offered to public employee retirees”).
No principle of statutory construction supports a contrary view.
Defendants contend that the reach of article XIII, section 5, is confined to the retirement annuity payments authorized by the Pension Code, but there is nothing in the text of the Constitution that warrants such a limitation. Just as the legislature is presumed to act with full knowledge of all prior legislation (People v. Jones, 214 Ill. 2d 187, 199 (2005)), the drafters of a constitutional provision are presumed to know about existing laws and constitutional provisions and to have drafted their provision accordingly (see 16 Am. Jur. 2d Constitutional Law § 35 (2009); Plymouth Township v. Wayne County Board of Commissioners, 359 N.W.2d 547, 552 (Mich. App. 1984).
If they had intended to protect only core pension annuity benefits and to exclude the various other benefits state employees were and are entitled to receive as a result of membership in the State’s pensions systems, the drafters could have so specified. But they did not.
The text of the provision proposed to and adopted by the voters of this State did not limit its terms to annuities, or to benefits conferred directly by the Pension Code, which would also include disability coverage and survivor benefits. Rather, the drafters chose expansive language that goes beyond annuities and the terms of the Pension Code, defining the range of protected benefits broadly to encompass those attendant to membership in the State’s retirement systems.
Then, as now, subsidized health care was one of those benefits. For us to hold that such benefits are not among the benefits of membership protected by the constitution would require us to construe article XIII, section 5, in a way that the plain language of the provision does not support.
We may not rewrite the pension protection clause to include restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve.
Defendants contend that their position is supported by the debates at the constitutional convention preceding the adoption of article XIII, section 5.
This contention is unpersuasive.
When construing and applying article XIII, section 5, in the past, we have considered the history underlying that provision and the convention debates preceding its adoption.
Yet, none of those cases involved the question of whether certain benefits attendant to membership in a state retirement system are covered by the protections guaranteed by article XIII, section 5.
Because we find that this issue can be decided based on the plain language of the provision, “the debates can have little or no bearing or effect” with respect to how we construe that language. People ex rel. Watseka Telephone Co. v. Emmerson, 302 Ill. 300, 311 (1922).
Even if reference to the convention debates were appropriate, it would not aid the State’s position.
Section 5 of article XIII had no antecedent in the prior constitution and was not included in the report of any committee of the Sixth Constitutional Convention, where the provisions of the Constitution of 1970 were formulated.
It was proposed on the floor of that convention for the first time without a formal hearing, and there is no committee report to aid in its interpretation. See Peters v. City of Springfield, 57 Ill. 2d 142, 150-51 (1974); ILCS Ann., 1970 Const., art. XIII, § 5, Constitutional Commentary, at 665 (Smith-Hurd 2006).The floor debates on the new provision have previously been characterized by the courts as “confused” (Kraus, 72 Ill. App. 3d at 843) and reflecting “uncertainty as to the scope of the restriction which the section imposed on legislative bodies” (Peters v. City of Springfield, 57 Ill. 2d 142, 151 (1974)).
Accordingly, we must be circumspect in attempting to draw conclusions based on what was said during the course of the debates.
Some insight is provided by the context in which the provision which ultimately became article XIII, section 5, was proposed to the constitutional convention.
At the time of the convention, Illinois adhered to the traditional classification of pension plans as either mandatory or optional.
Where an employee’s participation in a pension plan was mandatory, the rights created in the relationship were considered to be in the nature of a gratuity that could be revoked at will. Where the employee’s participation in a pension plan was optional, the pension was considered enforceable under contract principles.
This distinction created uncertainty regarding the enforceability of pension rights, a concern exacerbated by the proposed creation of broad home rule powers for municipalities, which some delegates to the convention feared could lead municipalities into debt and result in their abandoning their pension obligations to public employees, including police officers and firefighters. McNamee, 173 Ill. 2d at 440.
Delegates were also mindful that in the past, appropriations to cover state pension obligations had “been made a political football” and “the party in power would just use the amount of the state contribution to help balance budgets,” jeopardizing the resources available to meet the State’s obligations to participants in its pension systems in the future. 4 Record of Proceedings, Sixth Illinois Constitutional Convention 2930-31 (statements of Delegate Bottino).
Delegate Green, who first proposed the provision which became article XIII, section 5, began his presentation to the convention by stating that it does two things: “[i]t first mandates a contractual relationship between the employer and the employee; and secondly, it mandates the General Assembly not to impair or diminish these rights.” 4 Record of Proceedings 2925 (statements of Delegate Green).
It does so, he explained, in order to protect “public employees who are beginning to lose faith in the ability of the state and its political subdivisions to meet these benefit payments” and to address the “insecurity on the part of the public employees [which] is really defeating the very purpose for which the retirement system was established ***.” Id.
Delegate Kemp, who spoke in support of the measure, viewed its purpose as “mak[ing] certain that irrespective of the financial condition of a municipality or even the state government, that those persons who have worked for often substandard wages over a - 17 - long period of time could at least expect to live in some kind of dignity during their golden years ***.” Id. at 2926 (statements of Delegate Kemp).
In subsequent comments, other delegates reaffirmed that the provision was designed to confer contractual protection on pension benefits (see, e.g., id. at 2929-30 (statements of Delegate Whalen)) and give beneficiaries, pensioners or their dependents “a basic protection against abolishing their rights completely or changing the terms of their rights after they have embarked upon the employment—to lessen them” (id. at 2929 (statements of Delegate Kinney)).
When asked for a summation, Delegate Green stated:
“What we are trying to do is to mandate the General Assembly to do what they have not done by statute. *** Now, I think they either ought to live up to the laws that they pass or that very quickly we ought to stop when we are hiring public employees by telling them that they have any retirement rights in the state of Illinois.
If we are going to tell a policeman or a school teacher that, ‘Yes, if you will work for us for your thirty years or until whenever you reach retirement age, that you will receive this,’ if the state of Illinois and its municipalities are going to play insurance company and live up to these contributions, then they ought to live by their own rules. And this is all in the world this mandate is doing.” Id. at 2931 (statements of Delegate Green).
The foregoing remarks demonstrate that article XIII, section 5, was intended to eliminate the uncertainty that existed under the traditional classification of retirement systems and to guarantee that retirement rights enjoyed by public employees would be afforded contractual status and insulated from diminishment or impairment by the General Assembly.
In light of the constitutional debates, we have concluded that the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them. People ex rel. Sklodowski v. State of Illinois, 182 Ill. 2d 220, 232 (1998); McNamee, 173 Ill. 2d at 446.
To infer more, however, would require more than the reports of the floor debate reasonably support. While there was some discussion regarding how the provision would work in practice, the specific issue of health care benefits received by state annuitants under the predecessor provision to the Group Insurance Act was not raised or addressed, and nothing in the debates evinces an intention to treat annuitant health care benefits differently from the other benefits of pension and retirement system membership then in effect.
Our conclusion that health insurance subsidies are constitutionally protected by the pension protection clause is supported by the recent decision in Everson v. State of Hawai’i, 228 P.3d 282 (Haw. 2010), which addressed the reach of a provision in the Hawaii state constitution that is similar to article XIII, section 5, and shares the same origin.
That provision states that “[m]embership in any employees’ retirement system of the State or any political subdivision thereof shall be a contractual relationship, the accrued benefits of which shall not be diminished or impaired.” Haw. Const., art. XVI,
Like Illinois, Hawaii state law confers on public employees a package of benefits which includes both health insurance and eligibility for retirement annuities. Everson, 228 P.3d at 288, 292-93.
As in Illinois, health coverage is addressed in a separate statute from the law governing retirement annuities, but eligibility for health care coverage following retirement is conditioned on membership in one of specified public retirement systems. Id. at 294.
When a challenge was raised to the validity of a statutory change affecting health care benefits for retired public employees, the Supreme Court of Hawaii concluded, as we have, that because the health care benefits arise from and are conditioned on membership in a public retirement system, they qualify as a benefit of membership in the retirement system and fall within the protections of Hawaii’s constitutional counterpart to article XIII, section 5. Id. at 295-97.
In urging a contrary result, defendants place significant reliance on an earlier opinion by the New York Court of Appeals, that state’s highest court of review, in In re Lippman, 487 N.E.2d 897 (N.Y. 1985).
At issue in Lippman was a decision by a local school board to substantially reduce the amount it would contribute toward the health care premiums for its retired employees and their dependents by lowering those contributions to the minimum amounts permitted by state law.
That decision was challenged on the grounds that it violated article V, section 7 of New York’s Constitution, which was the model for article XIII, section 5 of our Constitution, and provided that “[a]fter July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired.” Id. at 899.
The New York Court of Appeals rejected the challenge and held that the protections afforded by article V, section 7, extended only to benefits directly related to the terms of the retirement annuity, that retired employees receive subsidies for health insurance premiums “not as a benefit of membership in the retirement system but because he or she was an employee of the State of New York or participating employer,” and that the premium increase involved was within the amounts permitted by state statute. Id. at 899-900.
The Supreme Court of Hawaii found the New York high court’s ruling distinguishable and unpersuasive. Everson, 228 P.3d at 297-98. We agree. As set forth above, when article XIII, section 5, was proposed, the benefits afforded state employees included subsidized health care both while they were working and after they retired, life insurance, eligibility for a retirement annuity, disability coverage and survivor benefits. Because an employee’s eligibility for subsidized health care following retirement, as well as his or her eligibility for an annuity, disability coverage and survivor benefits, is conditioned on membership in one of the State’s various public pension systems, all of the benefits that flow from that relationship are constitutionally protected under article XIII, section 5.
There is nothing in the text of article XIII, section 5, its history, or the convention debates that would support a conclusion that only the retirement annuity itself falls within the provision’s protections.
For the reasons previously discussed, the other benefits, including subsidized health care, are also properly regarded as benefits of membership in the public pensions systems and therefore likewise protected. Moreover, unlike the action challenged in the Lippman case, enactment of Public Act 97-695 did not involve a mere increase in contribution levels within boundaries authorized by existing state law. In this case, the fixed standards established under the existing law were eliminated completely once Public Act 97-695 took effect.
Defendants observe that health care costs and benefits are governed by a different set of calculations than retirement annuities. While that is unquestionably true, it is also legally irrelevant. The criterion selected by the drafters and approved by the voters is status based. Whether a benefit qualifies for protection under article XIII, section 5, turns simply on whether it is derived from membership in one of the State’s public pension systems. If it qualifies as a benefit of membership, it is protected.
If it does not, it is not.
How the benefit is actually computed plays no role in the inquiry.
Finally, we point out again a fundamental principle noted at the outset of our discussion. Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner. This rule of construction applies with equal force to our interpretation of the pension protection provisions set forth in article XIII, section 5.
Accordingly, to the extent that there may be any remaining doubt regarding the meaning or effect of those provisions, we are obliged to resolve that doubt in favor of the members of the State’s public retirement systems.
From Justice Anne Burke's dissent
The meaning of a constitutional provision depends on the common understanding of the citizens who adopted it. League of Women Voters of Peoria v. County of Peoria, 121 Ill. 2d 236, 243 (1987); Kalodimos v. Village of Morton Grove, 103 Ill. 2d 483, 492-93 (1984).
To determine that understanding, courts look first to the plain and generally understood meaning of the words used in the provision. League of Women Voters of Peoria, 121 Ill. 2d at 243; Kalodimos, 103 Ill. 2d at 493. If doubt remains after the language of the provision has been considered, it is appropriate to consult the debates of the constitutional convention to ascertain the meaning that the delegates attached to the provision since it is only with the consent of the convention that such provisions are submitted to the voters in the first instance. League of Women Voters of Peoria, 121 Ill. 2d at 243-44; Kalodimos, 103 Ill. 2d at 493.
As its title states, the pension protection clause protects “pension and retirement rights.” Commonly understood, a pension or retirement system is a plan or fund that provides retirement income to employees.
As the United States Supreme Court has stated, the “ordinary meaning” of a pension is “ ‘a fixed sum ... paid under given conditions to a person following his retirement from service (as due to age or disability) or to the surviving dependents of a person entitled to such a pension.’ ” Rousey v. Jacoway, 544 U.S. 320, 330 (2005) (quoting Webster’s Third New International Dictionary 1671 (1981)); see also, e.g., In re Marriage of David, 367 Ill. App. 3d 908, 914 (2006) (“The term ‘pension’ means ‘[r]etirement benefit paid regularly (normally, monthly), with the amount of such based generally on length of employment and - 22 - amount of wages or salary of pensioner.’ ” (quoting Black’s Law Dictionary 1134 (6th ed. 1990))).
More specifically, this court has held that the pension protection clause does two things. First, it makes “[m]embership in any pension or retirement system of the State” an “enforceable contractual relationship.” (Internal quotation marks omitted.) People ex rel. Sklodowski v. State of Illinois, 182 Ill. 2d 220, 228-29 (1998).
This contractual relationship, we have explained, “is governed by the actual terms of the Pension Code at the time the employee becomes a member of the pension system.” Id. at 229. Second, the clause provides that the benefits of the contractual relationship “governed by the actual terms of the Pension Code” shall not be “diminished or impaired.” (Internal quotation marks omitted.) Id. Stated otherwise, by its plain language, the pension protection clause prohibits legislative action that diminishes or impairs pension benefits by altering the terms of the contract governing the pension.
In this case, plaintiffs contend that the schedule of subsidized health insurance premiums provided under the former version of section 10 of the State Employees Group Insurance Act of 1971 (5 ILCS 375/10 (West 2012)), are benefits protected from impairment or diminishment under the pension protection clause. Plaintiffs further contend that Public Act 97-695 (eff. July 1, 2012), which eliminated the statutory schedule under the Group Insurance Act, impaired or diminished those benefits and, therefore, violated the pension protection clause.
It is clear, however, that the subsidized health insurance premiums provided under the Group Insurance Act are not pension benefits. Health insurance premiums under the Group Insurance Act are not provided by any state pension or retirement system and, thus, cannot constitute a contractual relationship “governed by the actual terms of the Pension Code” (Sklodowski, 182 Ill. 2d at 229). Moreover, as the circuit court below observed, pension benefits differ substantially from subsidized health insurance premiums.
Pension benefits are provided to retirees in the form of a fixed income. They are paid from protected pension funds and the amount of the benefit is fixed at the time of retirement based on a formula that considers, among other things, the length of the retiree’s service and salary during employment. See, e.g., Rousey, 544 U.S. at 330.
The cost of subsidized health care premiums, on the other hand, is variable and cannot be predicted using the actuarial analysis employed in pension calculations.
Unlike fixed pension distributions, health care costs are not within the control of the legislature and are subject to change depending on advancements in medical technology, increases in the costs of treatments, and the availability of insurance plans offered by insurance providers.
State-subsidized health insurance premiums are benefits, and may, in certain circumstances, be entitled to legal protection. They are not, however, in the plain and ordinary meaning of the word, “pension” benefits.
The majority concludes, however, that the schedule of subsidized health insurance premiums provided under the former section 10 of the Group Insurance Act is protected under the pension protection clause. In so holding, the majority reads the clause as stating that “something” qualifies as a constitutionally protected benefit if it “result[s] from”, is “conditioned on” , “flows directly from” ), or is “attendant to” , membership in one of the State’s pension or retirement systems.
Thus, according the majority, because the health care subsidies under the Group Insurance Act were provided to members of the retirement system, those benefits “flowed from” membership and are an enforceable contractual right under the pension protection clause.
I disagree.
To reach its result, the majority must read into the pension protection clause language that is not there. Nowhere in the clause does it state that every benefit which “results from,” is “conditioned on,” “flows directly from” or “is attendant to” being a member of a pension system is provided constitutional protection.
These phrases, which form the crux of the majority’s opinion, are simply crafted out of whole cloth. It is fundamental that the judiciary may not add language to a constitutional provision that was not approved by the voters of this state. To do so is to usurp the sovereign power of the people. The majority’s addition of language to the clause is error.
Moreover, by adding language to the pension protection clause, the majority fundamentally changes its meaning. The clause no longer protects the statutory benefits provided by a pension or retirement system. Instead, it provides constitutional protection to any statutory benefit—however unrelated to pensions—if the recipient of the benefit is a member of a pension system.
And the majority provides no limit to this holding. Should the city of Springfield enact an ordinance which states that the members of the municipal pension system will receive an honorary plaque upon retirement, that benefit would “flow from” or be “conditioned on” membership in the system. The plaque, under the majority’s reasoning, would be a constitutionally protected contractual right that could not be diminished or impaired. I do not think this is what the drafters of the pension protection clause intended.
Unsurprisingly, nothing in the constitutional debate regarding the pension protection clause supports the majority’s reading of the provision. As the majority candidly acknowledges, the constitutional debate contains no references to health insurance premiums or other non-pension benefits for retirees. To the contrary, the unambiguous statements of the sponsoring delegates reflect that it was designed to protect a public retiree’s right to collect postretirement income in the form of an annuity and to ensure that the terms under which an employee acquired that right could not be altered to his or her detriment.
Delegate Kinney, who sponsored the proposed pension protection clause, described the scope of the benefits protected under the provision:
“Benefits not being diminished really refers to this situation: If a police officer accepted employment under a provision where he was entitled to retire at two-thirds of his salary after twenty years of service, that could not subsequently be changed to say he was entitled to only one-third of his salary after thirty years of service, or perhaps entitled to nothing. *** *** *** It is simply to give [beneficiaries] a basic protection against abolishing their rights completely or changing the terms of their rights after they have embarked upon the employment—to lessen them.” (Emphasis added.) 4 Proceedings 2929 (statements of Delegate Kinney).
No comment from any delegate suggests anything to contradict this understanding.
Nor can it reasonably be suggested that the delegates’ silence regarding health insurance benefits supports the majority’s reading of the clause. At the time of the drafting of the 1970 Constitution, all of the provisions of the Pension Code pertained to the benefits provided by a pension or retirement system, that is, a fixed retirement income.
No provisions addressed, or related to, subsidized health care premiums or any other non-pension benefits. It is unreasonable to assume that the delegates had health care benefits in mind when discussing the protection of pension rights when no such benefits were provided for in any pension or retirement system then in existence.
It is, however, reasonable to assume that something as financially significant as subsidies for health insurance premiums, which cost the State many millions of dollars, would have been mentioned at least once during the constitutional debate, even if only in passing. They were not. In short, then, there is no support in the constitutional debate for the majority’s reading of the pension protection clause.
Nor is there any support in our case law. As this court has stated, the contractual relationship protected by the pension protection clause is the relationship which “is governed by the actual terms of the Pension Code at the time the employee becomes a member of the pension system.” Sklodowski, 182 Ill. 2d at 229 (citing Di Falco v. Board of Trustees of the Firemen’s Pension Fund of the Wood Dale Fire Protection District No. One, 122 Ill. 2d 22, 26 (1988), and Kerner v. State Employees’ Retirement System, 72 Ill. 2d 507, 514 (1978)).
The subsidized insurance premiums at issue here are not part of any pension or retirement system and, thus, cannot constitute a contractual relationship governed by the terms of the Pension Code.
Further, this court has repeatedly observed that the pension protection clause protects not health benefits or other non-pension benefits, but the public employees’ contractual rights to “receive the money due them at the time of their retirement.” (Emphasis added.) People ex rel. Illinois Federation of Teachers v. Lindberg, 60 Ill. 2d 266, 271 (1975); see also Sklodowski, 182 Ill. 2d at 230 (same); McNamee, 173 Ill. 2d at 444 (same). At no time has this court suggested that the pension protection clause protects any and all statutory benefits received by a person who is a member of a pension system.
Relevant case law from other jurisdictions also fails to support the majority’s reading of the clause. Illinois courts have repeatedly looked to New York decisions in determining the scope of the protection granted under the pension protection clause since the clause was patterned on a similar provision in the New York constitution. the New York Civil Service Law authorized a system of health insurance benefits for public employees and retirees. Id. at 898.
Pursuant to that statute, each participating employer was required to pay no less than 50% of the cost of premiums for employees, and 35% for their dependents, but state employers were authorized to provide greater contributions at their discretion.
The statute further provided that any employee or retiree contributions toward individual or dependent coverage were to be deducted from salary payments or retirement allowance as the case may be.
In accordance with the terms of the statute, a board of education adopted a resolution providing for its payment of 100% of the health insurance premiums for its retired employees, as well as for 50% of the premiums for retirees’ dependents. Id. Subsequently, the board of education adopted a new resolution that reduced its level of contributions to the statutory minimums of 50% of the health insurance premium for retirees and 35% of the premium for dependents. Id. The reduction in premium contributions was challenged as a violation of the New York Constitution’s pension protection clause, which is virtually identical to that of Illinois. Id.
The Lippman court held that the reduction did not offend the pension protection clause because the insurance premium payments did not constitute “retirement benefits” within the meaning of the constitutional provision. Id. at 899. In reaching this conclusion, the court noted that the relevant statute did not establish a direct relationship between the insurance coverage and retirement benefits, stating that “the only relation between health benefits and retirement benefits is the purely incidental one that the latter provides the means by which the former is paid.” Id. at 900.
The Lippman court concluded that “more than an incidental relationship to the retirement system must be found before an employee benefit will be held to be within the area of action prohibited by the Constitution.” Id. at 899.
In addition, the court observed that previous cases finding violations of the pension protection clause all involved changes that were “directly related to the retirement benefit.” (Emphasis omitted.) Id. (citing, inter alia, Kleinfeldt v. New York City Employees’ Retirement System, 324 N.E.2d 865, 868 (N.Y. 1975) (holding that a limitation on the rate of compensation, which “is the most significant part of the formula” for determining retirement benefits, was constitutionally prohibited)); Birnbaum v. New York State Teachers Retirement System, 152 N.E.2d 241, 245 (N.Y. 1958) (invalidating a change in mortality tables that directly affected the calculation of retirement annuities and observing that “it is the money payments [received] from either a pension or retirement system that is the principal if not the sole benefit the system affords”).
The Lippman court further reasoned that the health coverage at issue was an employment benefit, not a retirement benefit, because the relevant statutory provision was not contained in the pension statute, but was set forth in a separate statute, which provided health benefits “not only to retired employees but also to employees still in service.” Lippman, 487 N.E.2d at 900. Finally, the court observed that nothing in the statutory language indicated that employers were precluded from reducing contributions to the statutory minimum after that level had once been exceeded, or that the separately enacted provisions of the health insurance statute were intended to be a retirement benefit within the meaning of the constitutional provision. Id.
The primary factors that guided the Lippman court are also present in this case. The provision of health insurance premium subsidies is set forth in the Group Insurance Act, not in the Pension Code. Also, as with the New York law involved in Lippman, any contribution toward health insurance premiums that must be paid by a retiree is to be deducted from the individual’s retirement annuity. In addition, the statements made by the delegates during the convention debate do not indicate an intent to protect other benefits that are unrelated to postretirement income. Lippman is thus squarely on point and persuasive.
Seeking to avoid the logic of Lippman, the majority relies on Everson v. State of Hawai’i, 228 P.3d 282 (Haw. 2010), and Duncan v. Retired Public Employees of Alaska, Inc., 71 P.3d 882 (Alaska 2003), in which the supreme courts of Alaska and Hawaii held that provisions in their constitutions applied to state-subsidized health insurance provided to retired public employees. These cases are not persuasive. Duncan is distinguishable on its facts. In that case, the Alaska Supreme Court held that health insurance benefits for retired public employees were constitutionally protected, as rights of membership in a public pension system. Duncan, 71 P.3d at 888.
Underlying this ruling was the determination that retiree health benefits, which were granted by the same statute that governed public pensions, constituted a component of an employee’s “retirement benefit package,” which becomes part of the employment agreement at the time the employee is hired. Id. at 887-88. Thus, the court concluded that “whatever benefits might be provided by state retirement systems” were meant to be constitutionally protected. Id. at 887.
The Duncan court distinguished Lippman on the ground that it “involved a medical plan that was separate from the state retirement system,” and “Alaska’s retirement system includes a system of retirement benefits that include more than just a pension.” Id. at 894. The decision in Duncan does not govern the present case. Here, the Group Insurance Act is entirely separate from the Pension Code, which is similar to the statutory structure of New York. Also, there is no language in the Group Insurance Act or the constitutional debates evincing an intent to include statutory health insurance benefits among the benefits of membership in a pension or retirement system.
In Everson, the Hawaii Supreme Court held that statutory health insurance benefits for retired public employees were protected by a provision in Hawaii’s constitution that is similar to our pension protection clause. Everson, 228 P.3d at 295-96. Although the retiree health benefits at issue were provided for, paid and administered outside the pension system, the court concluded that Hawaii’s constitutional provision applied to all statutory benefits “derived from,” “arising from,” or “conditioned” on the status of “membership” in a public retirement system. Id. at 295-98.
In so holding, the Everson court specifically noted and relied upon the comments of the constitutional delegates indicating that they intended to protect any additional benefits granted by the legislature in the future that derive from such membership. Id. at 295-96. The court concluded that the Hawaii legislature did, after the adoption of the constitution, change the system and that it did so “to prevent a diminishment of existing health benefits for public employees and retirees.” (Internal quotation marks omitted.) Id. at 296-97.
Unlike Hawaii, nothing in our constitutional debate indicates that the framers of the 1970 Constitution authorized the General Assembly to extend constitutional protection to any additional non-pension benefits at some time in the future. Moreover, the reasoning employed by the Hawaii Supreme Court is contrary to our long-standing interpretation of Illinois’s pension protection clause as protecting postretirement income.
In addition, defendants correctly point out that acceptance of the view adopted by the Hawaii Supreme Court in Everson disregards the fundamental difference between pensions and health insurance. As was suggested by the concurring opinion in Everson, the court’s holding, taken to its logical conclusion, would afford constitutional protection to the “array of health plan services most advantageous to the employee during his or her service,” which could never be changed. See Everson, 228 P.3d at 303 (Acoba, J., specially concurring). Yet, a health benefit package cannot be fixed at its “most advantageous” level. Flexibility is necessary in the provision of health benefits, which are “subject to fluctuating and unpredictable variables.” Moore v. Metropolitan Life Insurance Co., 856 F.2d 488, 492 (2d Cir. 1988).
Therefore, “medical insurance must take account of inflation, changes in medical practice and technology, and increases in the costs of treatment independent of inflation. These unstable variables prevent accurate prediction of future needs and costs.” Id.
In sum, neither the plain language of the pension protection clause, the constitutional debate, our own case law, or case law from other jurisdictions supports the majority’s position. The pension protection clause protects pensions, not subsidized health care premiums.
The fact that the General Assembly has the power to grant retirees supplemental benefits, in addition to pension annuities, does not mean that those additional benefits are constitutionally protected and cannot be modified or reduced by future legislation. As defendants have acknowledged, the legislature has the ability to ensure that such additional benefits fall within the pension protection clause, but it must do so explicitly. The legislature could have expressly mandated that the provision of state-funded premium subsidies, pursuant to the graduated schedule, constitutes a contract right and is protected by the constitution, but it did not do so.
In fact, the legislature has repeatedly modified the terms of the benefits provided under the Group Insurance Act, including reducing them on multiple occasions.
For the foregoing reasons, I would hold that the statutory provision of health insurance premium subsidies is not a benefit of membership in a pension or retirement system. Accordingly, the circuit court did not err in dismissing the plaintiffs’ claims based on the pension protection clause in article XIII, section 5, of the Illinois Constitution.
The majority holds that “the State’s provision of health insurance premium subsidies for retirees is a benefit of membership in a pension or retirement system within the meaning of article XIII, section 5, of the Illinois Constitution” and, as a result, these subsidies are constitutionally protected from any diminishment or impairment.
Accordingly, the majority finds that “the circuit court erred in dismissing plaintiffs’ claims that Public Act 97-695 is void and unenforceable under article XIII, section 5,” and remands the cause for further proceedings. Id. As stated above, I disagree with this holding. I am also concerned, however, because the majority fails to address the remaining claims in plaintiffs’ complaints, which were dismissed in the circuit court and are now before this court on direct review.
In addition to alleging that Public Act 97-695 violates the pension protection clause of the Illinois Constitution, two of the complaints before the circuit court alleged a violation of the contracts clause (Ill. Const. 1970, art. I, § 16); one complaint alleged a violation of the separation of powers clause (Ill. Const. 1970, art. II, § 1); and certain complaints alleged common-law claims based on contract and promissory estoppel. The majority does not address any of these claims, stating that “[o]ur holding that plaintiffs are entitled to proceed on their pension protection clause claims obviates the need to address the sufficiency of their remaining claims.”
I do not see how the majority’s determination regarding the pension protection clause claims obviates the need to address the remaining claims or provides plaintiffs with all the relief they seek. The merits of plaintiffs’ pension protection clause claims remains an open question.
As the Attorney General points out in her brief, “because the circuit court held that the rights claimed by the plaintiffs were not protected by the Pension Protection Clause, it had no reason to explore whether Public Act 97-695 - 30 - would be an unconstitutional diminishment or impairment of those rights, or whether they were subject to a justifiable exercise of a power to adjust private contractual rights, including in contracts with the government itself.”
Moreover, the majority has not determined here whether Public Act 97-695 impairs or diminishes retirees’ pension benefits and, thus, unconstitutionally violates the pension protection clause. That is the issue that will be decided by the circuit court on remand.
Because we have expressed no opinion on the merits of plaintiffs’ pension protection clause claims, there remains the possibility that defendants could yet prevail on these claims. In that event, the parties would need to know whether plaintiffs may go forward on any of the other claims raised in their complaints. These additional claims were dismissed by the circuit court and plaintiffs have sought reversal of the dismissals in this court.
Yet the majority does not discuss them. What does the majority’s silence here mean? Does the majority mean to affirm the circuit court’s dismissal of these claims? Or are they still viable because they have not been reviewed? To avoid delay and additional expense for the parties, the dismissal of these claims, which have been fully briefed and argued, should be addressed by this court.