Kanerva v. Weems

2014 IL 115811IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
(Docket No. 115811)
ROGER KANERVA et al., Appellants, v. MALCOLM WEEMS et al., Appellees.
Opinion filed July 3, 2014.
JUSTICE FREEMAN delivered the judgment of the court, with opinion.
Chief Justice Garman and Justices Thomas, Kilbride, Karmeier, and Theis
concurred in the judgment and opinion.
Justice Burke dissented, with opinion.
OPINION
¶1 At issue in this appeal is the validity of Public Act 97-695 (eff. July 1, 2012), which
amended section 10 of the State Employees Group Insurance Act of 1971 (Group
Insurance Act) (5 ILCS 375/10 (West 2012)) by eliminating the statutory standards for
the State’s contributions to health insurance premiums for members of three of the
State’s retirement systems. In place of those standards, Public Act 97-695 requires the
Director of the Illinois Department of Central Management Services to determine
annually the amount of the health insurance premiums that will be charged to the State
and to retired public employees. Plaintiffs include members of the State Employees’
Retirement System (SERS), the State Universities Retirement System (SURS), and the
Teachers’ Retirement System of the State of Illinois (TRS), which are the three state
retirement systems that are affected by Public Act 97-695. Plaintiffs brought four
putative class actions challenging the constitutionality of Public Act 97-695. Each of
the complaints alleged that Public Act 97-695 violates the pension protection clause of
the Illinois Constitution of 1970 (Ill. Const. 1970, art. XIII, § 5). Two of the complaints
alleged a violation of the contracts clause (Ill. Const. 1970, art. I, § 16), and one
complaint alleged a violation of the separation of powers clause (Ill. Const. 1970, art.
II, § 1). In addition, certain plaintiffs sought injunctive relief or damages for
common-law claims based on contract and promissory estoppel. On motion of
defendants, the circuit court of Sangamon County dismissed all of the complaints, and
plaintiffs appealed. This court granted a subsequent motion for direct review, pursuant
to Supreme Court Rule 302(b) (eff. Oct. 4, 2011)), and ordered that the appeals from
the four consolidated cases be transferred to us. We subsequently allowed “certified
classes of participants in the City of Chicago’s annuitant healthcare programs” to file a
brief as amicus curiae on behalf of plaintiffs and the City of Chicago to file a brief as
amicus curiae on behalf of defendants (Ill. S. Ct. R. 345 (eff. Sept. 20, 2010)). For the
reasons that follow, the judgment of the circuit court is reversed, and the cause is
remanded for further proceedings.
¶2 BACKGROUND
¶3 In addition to the wages they are paid, most public employees in Illinois receive
additional benefits, including subsidized health care, disability and life insurance
coverage, eligibility to receive a retirement annuity, and survivor benefits. Disability,
retirement annuity and survivor benefits are governed by the Illinois Pension Code (40
ILCS 5/1-101 et seq. (West 2012)). For state employees, the program of group life and
health insurance benefits, which is available to active employees, certain of their
dependents, and certain retirees and their dependent beneficiaries, was previously
governed by the State Employees’ Insurance Benefits Act (Ill. Rev. Stat. 1969, ch. 127,
¶ 501 et seq.). Pursuant to that statute, the State was required to pay 50% of the health
insurance premium for qualified employees and annuitants. Ill. Rev. Stat. 1969, ch.
127, ¶ 509(c). The program of disability, retirement and survivor benefits and the
program of group life and health insurance benefits were in effect when the provisions
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of Illinois Constitution of 1970 were formulated during the Sixth Constitutional
Convention and approved by the voters of Illinois. 1
¶4 Effective January 1, 1972, the State Employees’ Insurance Benefits Act was
repealed (Pub. Act 77-476 (eff. Jan. 1, 1972)) and superseded by the Group Insurance
Act, which also provided a program of group life and group health insurance to current
state employees, retired state employees, and certain of their dependents (Ill. Rev. Stat.
1971, ch. 127, ¶ 522).
¶5 The Group Insurance Act increased the health insurance benefit that had been
granted under the prior statute. Initially, it called for the State to pay the full cost “of the
basic non-contributory group life insurance and group health insurance on each eligible
employee and annuitant” (Ill. Rev. Stat. 1971, ch. 127, ¶ 530(a)), but that provision was
later qualified. Effective July 1, 1992, the General Assembly amended the law to
authorize the Director to require most members who were employees to begin
contributing up to $12.50 per month for their basic group health benefits (5 ILCS
375/10(a) (West 1992)), a cap which was removed in 1995 (5 ILCS 375/10(a) (West
1996)). With respect to retired members, the 1992 amendment provided as follows:
“The State shall pay the cost of the basic program of group health benefits only
after benefits are reduced by the amount of benefits covered by Medicare for all
retired members and retired dependents aged 65 or older who are entitled to
benefits under Social Security or the Railroad Retirement system or who had
sufficient Medicare-covered government employment ***.” 5 ILCS 375/10(a)
(West 1992).
The reach of this modification in annuitant benefits was prospective only, where the
amendment expressly provided that:
“such reduction in benefits shall apply only to those retired members or retired
dependents who (1) first become eligible for such Medicare coverage on or
after the effective date of this amendatory Act of 1992; or (2) remain eligible
for, but no longer receive Medicare coverage which they had been receiving on
or after the effective date of this amendatory Act of 1992.” Id.
1
The convention convened Dec. 8, 1969, and adjourned Sept. 3, 1970. The provisions of the new
constitution were submitted to the voters for ratification at a special election held Dec. 15, 1970. 1
Record of Proceedings, Sixth Constitutional Convention, Introduction, vii-x.
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¶6 In 1997 and 1998, the General Assembly made further changes with respect to the
program of group health benefits for SERS, SURS and TRS annuitants, retired
members and survivors. It did so through Public Acts 90-65 (eff. July 7, 1997) and
90-582 (eff. May 27, 1998). As with the 1992 changes affecting retiree health benefits,
the 1997 and 1998 legislative acts were prospective. They applied only to “new SERS,
SURS and TRS annuitants,” “new SURS retirees,” or “new SERS, SURS and TRS
survivors,” a group limited to persons who first became annuitants, retired employees,
or survivors under the three retirement systems on or after specified dates in 1998.
Existing retirees and survivors continued to have the cost of their basic program of
group health benefits paid in full by the State, subject to the Medicare-related
modifications that were enacted in 1992. With respect to new SERS, SURS and TRS
annuitants, retired members and their survivors, the law instituted a system under
which the retired member or member’s survivor would be responsible for the cost of
the basic program of group health benefits offered by the State, but the State would
contribute toward that expense based on the length of the member’s service.
Specifically, the law provided that:
“[T]he State shall contribute toward the cost of the annuitant’s coverage under
the basic program of group health benefits an amount equal to 5% of that cost
for each year of creditable service upon which the annuitant’s retirement
annuity is based, up to a maximum of 100% for an annuitant with 20 or more
years of creditable service.” 5 ILCS 375/10(a-1) to (a-7) (West 1998).
The remainder, if any, of the cost of coverage under the basic program of group health
benefits was the responsibility of the annuitant or the survivor. Id. The terms of these
provisions were disseminated to affected state employees, annuitants and survivors
through, among other things, a benefit handbook published by the Illinois Department
of Central Management Services.
¶7 In 1998, the American Federation of State, County, and Municipal Employees,
Council 31 (AFSCME), the labor union that serves as the exclusive bargaining
representative for approximately 40,000 state employees, negotiated a new collective
bargaining agreement with the State on behalf of its members. That agreement
addressed the health insurance benefits that would be provided to former employees
who had retired and to then-current employees when they retired in the future. Its
substantive provisions were consistent with section 10 of the Group Insurance Act, as
amended by Public Acts 90-65 and 90-582. With respect to new annuitants and their
survivors, the agreement adopted the same service-based schedule of graduated
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premium percentages set forth in section 10. The collective bargaining agreement did
not alter the State’s obligations regarding annuitants who had retired prior to January 1,
1998, or their survivors. As to those individuals, the State remained obligated to pay the
cost of their basic program of group health benefits in full, subject to the 1992
Medicare-related modifications, just as it was with respect to annuitants and survivors
not covered by the collective bargaining agreement.
¶8 The collective bargaining agreement covered the period between 1997 and 2000.
The same terms governing the State’s obligation to pay the cost of the basic program of
group health benefits for annuitants and survivors were incorporated into successive
collective bargaining agreements covering the periods between 2000 and 2004, 2004
and 2008, and 2008 and 2012.
¶9 In 2002, the General Assembly enacted Public Act 92-566, effective June 25, 2002,
which offered an early retirement incentive program for members of SERS and TRS.
40 ILCS 5/14-108.3, 16-133.3 (West 2002). This statute amended Articles 14 and 16 of
the Pension Code to provide that members of these retirement systems could establish
up to five years of creditable service and age enhancements. The additional creditable
service and, subject to some limits, the age enhancements could be used to accelerate
an employee’s eligibility to receive a retirement annuity, allowing him or her to retire
earlier than would otherwise have been possible. Receipt of a retirement annuity
would, in turn, qualify the new annuitant to begin receiving the service-based
contributions from the State toward the cost of his or her coverage under the basic
program of group health benefits as specified by Public Acts 90-65 and 90-582 and, in
the case of employees who belonged to AFSCME, as required by the collective
bargaining agreements.
¶ 10 Participation in the statutory early retirement program was voluntary and subject to
several qualifications. In exchange for obtaining the benefits provided under the law,
employees were required to file written applications and terminate their employment
with the State before the end of the year. Any employee who retired early under the
program could not thereafter return to state service, other than as a temporary
employee, without forfeiting the age enhancement and creditable service obtained
through the program. Moreover, employees who wished to obtain the age enhancement
and additional creditable service had to make specified contributions that were based
on each individual employee’s rate of compensation and retirement contribution rate as
of June 1, 2002. See 40 ILCS 5/14-108.3, 16-133.3 (West 2002).
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¶ 11 Prior to the deadline for making an election to take early retirement under that
program, the Department of Central Management Services and SERS distributed
materials to state employees describing the law’s provisions, including the impact on
service credits under the applicable Pension Code provisions. That information was
disseminated in various ways, including in a pamphlet and on an internet website. The
SERS pamphlet stated, inter alia, “[o]n the effective date of your retirement, your
group health, dental and life insurance continues automatically. *** If you have at least
20 years of creditable service with SERS, your health coverage is provided at no cost.”
The web page of the Department of Central Management Services included a section
designated as “Frequently Asked Questions,” which stated “[i]f you have established at
least 20 years of creditable service, either by having worked 20 years or by purchasing
additional creditable service time under the Early Retirement provisions ***, your
health insurance coverage is provided at no cost when your pension begins.” These
representations accurately described the benefit eligibility rules under the governing
law in effect at the time.
¶ 12 Ten years after the 2002 early retirement program was implemented, the General
Assembly passed and the Governor signed into law Public Act 97-695, the legislation
that is the subject of this appeal. This new law, which took effect in July of 2012,
fundamentally altered the State’s obligation to contribute toward the cost of coverage
under the basic program of group health benefits for annuitants, retirees and survivors
in SERS, SURS, and TRS. It did so by repealing the statutory provisions that, subject to
the 1992 Medicare-related modifications, required the State to pay in full the cost of
benefits for pre-1998 annuitants, retirees and survivors in those three systems and to
make specified contributions according to the service-based graduated schedule for
those who became new annuitants, retirees or survivors under those systems beginning
in 1998. In place of those provisions, the General Assembly established a new system
under which the amount the State will contribute toward the basic program of group
health benefits on behalf of SERS, SURS and TRS annuitants, retirees and survivors is
to be determined administratively, on an annual basis, by the Director of the
Department of Central Management Services. 5 ILCS 375/10(a-8.5) (West 2012).
¶ 13 To facilitate the implementation of the new system, Public Act 97-695 amended the
Illinois Administrative Procedure Act (5 ILCS 100/1-1 et seq. (West 2012)) to permit
the contributions paid by “the State, annuitants, survivors, retired employees, or any
combination of those entities” for group health benefits to be altered through
emergency rules. 5 ILCS 100/5-45(c), (c-5) (West 2012). Rules subsequently
promulgated by the Department of Central Management Services pursuant to this
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authority have adopted a two-part formula for calculating premiums. 80 Ill. Adm. Code
2200.510 (2013). First (with limited exception for certain SURS retirees and their
survivors), annuitants, retirees and survivors must pay a portion of the cost of their
group health benefits based on the same service-based graduated schedule previously
set forth in now-repealed sections of the statute for post-1998 annuitants, retirees and
survivors. 80 Ill. Adm. Code 2200.530 (2013). In addition, each annuitant, survivor or
retired employee with primary coverage under the State’s group health insurance
program must also pay an extra sum based on the total annual annuity they are
receiving from any and all of the State’s five retirement systems. Annuitants, survivors
or retired employees with primary coverage under Medicare, and those 65 or older
whose primary coverage would otherwise be under the federal Medicare health
insurance program except for his or her inability to contribute to Medicare while
actively working, must pay an additional premium equal to 1% of their total annual
annuity. 80 Ill. Adm. Code 2200.520(b), (c) (2013). All others are required to pay an
additional premium equal to 2% of their total annual annuity. 80 Ill. Adm. Code
2200.520(a) (2013).
¶ 14 Application of Public Act 97-695 and the rules promulgated thereunder is not
limited to those who become annuitants or survivors on or after the statute’s effective
date. Unlike previous changes to the Group Insurance Act, Public Act 97-695 makes no
distinction based on when a person first became an annuitant, retiree or survivor. The
new two-part formula applies to existing annuitants, retirees and survivors as well as
those who retire or qualify as survivors in the future. Moreover, the new law contains
no exceptions for either annuitants, retirees or survivors whose health benefit costs
were negotiated by AFSCME and incorporated into collective bargaining agreements
or for those annuitants, retirees or survivors who elected to participate in the early
retirement program offered by the State in 2002.
¶ 15 Also, Public Act 97-695 does not require that the current two-part formula be
retained, nor does it impose any caps on the amount the Director may require
annuitants, retirees or survivors to pay toward their health insurance. Although
annuitants, retirees and survivors may waive or terminate their coverage (5 ILCS
375/10(a-8) (West 2012)), the law affords them no offsetting benefit for doing so.
¶ 16 After Public Act 97-695 took effect, four separate lawsuits were filed challenging
its constitutionality and contesting the State’s right to charge premiums under the new
system. Bauer v. Weems, No. 12-L-35 (Cir. Ct. Randolph Co.); Kanerva v. Weems,
No. 12-L-582 (Cir. Ct. Sangamon Co.); Maag v. Quinn, No. 12-L-162 (Cir. Ct.
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Sangamon Co.); McDonal v. Quinn, No. 12-L-987 (Cir. Ct. Madison Co.). All sought
certification as class actions pursuant to section 2-801 et seq. of the Code of Civil
Procedure (735 ILCS 5/2-801 et seq. (West 2012)), but none has yet been certified.
¶ 17 The named plaintiffs in the four cases include former state employees who retired
and first began to receive annuities from state retirement systems after January 1, 1998,
some as the result of an election to participate in the 2002 early retirement program. All
of the post-1998 retirees in the Bauer v. Weems, Kanerva v. Weems, and McDonal v.
Quinn cases are “new annuitants” within the meaning of Public Acts 90-65 and 90-582,
and throughout their retirement, the cost of their basic program of group health benefits
has been paid by the State in accordance with the service-based schedule of graduated
premium percentages set forth in that statute.
¶ 18 All the named plaintiffs in the Bauer v. Weems case are current or retired union
members covered by the collective bargaining agreements negotiated by AFSCME,
including the provisions of those agreements requiring the State to contribute to the
cost of their basic program of group health benefits under the terms described above.
¶ 19 The Kanerva v. Weems, Bauer v. Weems, and McDonal v. Quinn cases each name
as a defendant Malcolm Weems in his capacity as Director of the Department of
Central Management Services. The Department of Central Management Services is an
additional defendant in the Bauer v. Weems case, while the Board of Trustees of SERS
and the State Comptroller are additional defendants in the Kanerva v. Weems
litigation. In the McDonal v. Quinn case, the Governor and State Treasurer are named
as additional defendants. The Governor and the State Treasurer were initially the sole
defendants in the Maag v. Quinn case, though plaintiffs ultimately named Weems, the
Board of Trustees of SERS, and the State Comptroller as defendants in that case as
well.
¶ 20 All four cases assert that the obligations under the prior law, requiring the State to
make specified contributions toward the health insurance premium for annuitants and
survivors in the State’s retirement systems, constitute a benefit of membership in those
systems within the meaning of article XIII, section 5, of the Illinois Constitution of
1970 (Ill. Const. 1970, art. XIII, § 5). Plaintiffs contend that by amending the law to
authorize a system under which annuitants and survivors are required to contribute
additional amounts toward the cost of their health care, where those costs previously
were borne by the State, Public Act 97-695 has diminished or impaired this retirement
system membership benefit.
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¶ 21 The plaintiffs in the Kanerva v. Weems and Bauer v. Weems cases also challenge
the validity of Public Act 97-695 on additional grounds. The complaint filed in the
Kanerva v. Weems action asserts that Public Act 97-695 violates the separation of
powers clause in the Illinois Constitution (Ill. Const. 1970, art. II, § 1) as “an invalid
delegation of legislative authority to an administrative agency or officer” because it
fails to provide the Director of the Department of Central Management Services with
intelligible standards by which to exercise his statutory duty to determine the level of
contributions by the State and the retired members of the affected retirement systems.
¶ 22 The Kanerva v. Weems plaintiffs further claim that Public Act 97-695 violates the
contracts clause of the Illinois Constitution (Ill. Const. 1970, art. I, § 16), which
provides that “[n]o ex post facto law, or law impairing the obligation of contracts ***
shall be passed.” The Kanerva v. Weems complaint alleges that the provisions of the
prior law constituted a promise to provide health insurance coverage to retirees at no
cost if they had at least 20 years of creditable service on the effective date of their
retirements and that Public Act 97-695 deprived them of the benefit of the resulting
contractual right in violation of article I, section 16.
¶ 23 Finally, the Kanerva v. Weems plaintiffs also assert a claim for promissory
estoppel on behalf of those among them who had elected to participate in the early
retirement program in 2002. As to that subset of now-retired employees, they allege
that the State promised participants in that program that they would receive free health
insurance if they established at least 20 years of creditable service and that the subset of
plaintiffs who took early retirement reasonably and detrimentally relied on the State’s
promise by, among other things, retiring from state service and making cash payments
to obtain the additional service credits. That subset of plaintiffs claim that, under these
circumstances, the State should not be permitted to renege on its promise and should be
enjoined from withholding health insurance premiums from the annuity payments
owed to the early retirees.
¶ 24 The complaint in the Bauer v. Weems case also challenges Public Act 97-695 on
the ground that it constitutes an impermissible impairment of contract in violation of
the contracts clause (Ill. Const. 1970, art. I, § 16). The Bauer v. Weems plaintiffs allege
that the service-based schedule of graduated premium percentages, established by
section 10 of the Group Insurance Act, is a form of deferred compensation and that the
terms of the collective bargaining agreements, which incorporated that service-based
schedule, created an enforceable contractual right to collect this deferred compensation
upon their retirement. The Bauer v. Weems plaintiffs further assert that requiring
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contributions in excess of those required under the service-based graduated schedule,
as provided in the collective bargaining agreements, constitutes a breach of contract
under common-law principles, for which they are entitled to an award of damages.
¶ 25 The Kanerva v. Weems and Maag v. Quinn cases were both filed in Sangamon
County. The action brought by the Bauer v. Weems plaintiffs was initiated in Randolph
County. The action filed by the McDonal v. Quinn plaintiffs was brought in Madison
County. After the cases were commenced, defendants filed motions, pursuant to
Supreme Court Rule 384 (eff. Nov. 1, 1990), requesting that the Bauer v. Weems and
McDonal v. Quinn cases be transferred to the circuit court of Sangamon County and
consolidated with the Kanerva v. Weems and Maag v. Quinn cases. We granted that
motion, and all four cases were subsequently litigated in the circuit court of Sangamon
County.
¶ 26 Following consolidation, defendants filed a combined motion to dismiss all four
complaints, challenging the sufficiency of the pleadings under section 2-615 of the
Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2012)) and seeking
involuntary dismissal under section 2-619 of the Code (735 ILCS 5/2-619(a)(1) (West
2012)). See 735 ILCS 5/2-619.1 (West 2012). Defendants argued that plaintiffs failed
to state a cause of action for violation of article XIII, section 5, because that provision
protects only traditional pension benefits and does not encompass the State’s
obligations to contribute toward the cost of health care benefits for retired state
employees and their survivors, which was the subject of Public Act 97-695. Defendants
also asserted that plaintiffs failed to state a claim for violation of the contracts clause in
article I, section 16, because state employees, retirees and survivors have no
contractual right to the health care benefit subsidies that were abolished by Public
97-695. Defendants further contended that Public Act 97-695 was not subject to
challenge on the ground that it constituted an impermissible delegation of legislative
authority to an administrative agency or officer, where it provided the requisite clarity
and guidance.
¶ 27 The portion of defendants’ motion that sought involuntary dismissal under section
2-619 of the Code (735 ILCS 5/2-619 (West 2012)), was premised on the contention
that under the State Lawsuit Immunity Act (745 ILCS 5/1 et seq. (West 2012)) the
circuit court lacked jurisdiction to consider any of plaintiffs’ claims except those
seeking injunctive relief. Moreover, even as to those claims, the State argued that
because the Governor, the Treasurer, and the Comptroller have no authority for
enforcement of Public Act 97-695, the claims for injunctive relief should be dismissed
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as to them, and those claims should proceed, if at all, only against the Director of the
Department of Central Management Services.
¶ 28 While defendants’ motion to dismiss was pending, the Maag v. Quinn and
McDonal v. Quinn plaintiffs requested leave to amend their complaints to add
additional claims. The proposed second amended complaint in the Maag v. Quinn case
added a promissory estoppel claim similar to one asserted by the Kanerva v. Weems
plaintiffs. The McDonal v. Quinn plaintiffs’ amended complaint sought to add claims
sounding in contract and alleging that defendants had breached a promise to current
and prospective employees that the State would not charge them for medical and dental
insurance for themselves and their dependents upon retirement.
¶ 29 Following briefing and argument, the circuit court entered an order on March 19,
2013, dismissing all of plaintiffs’ claims on the grounds asserted in defendants’
motion. After entry of that dismissal order, the named plaintiff in the Maag v. Quinn
case asked the court to rule on his pending motion to amend his complaint. In response,
the Kanerva v. Weems plaintiffs stated that they did not want to delay appellate review
and that they opposed “another round of briefs and argument,” but would not oppose a
decision to “grant leave to file the amended complaints and then immediately dismiss
them without briefs or argument and based on [the circuit court’s] present ruling.” The
circuit court responded as follows:
“It is not my intention to re-brief or re-argue the Motions to Dismiss. *** If no
one objects, I will simply enter an order granting the Motion for Leave to File
the Amended Complaint, note that it only raises issues that were addressed by
the Motion to Dismiss, and then immediately dismiss the Amended Complaint
for the reasons set forth in my March 19 Order.”
The defendants advised the court that they had no objection to the suggested resolution,
explaining their agreement was “[i]n light of your indication of how you intend to
proceed if no party objects to the *** motions to file amended complaints ***, as well
as the lack of any objection by any of the plaintiffs’ counsel (including in Maag v.
Quinn and McDonal v. Quinn) to that manner of proceeding.” Counsel in the Maag v.
Quinn case also responded that his client had no objection to the suggested procedure,
but did not waive objections to the dismissal of that case.
¶ 30 On March 21, 2013, the circuit court entered a “corrected order” that granted the
Maag v. Quinn and McDonal v. Quinn plaintiffs leave to file amended complaints and
dismissed those complaints for the reasons set forth in its March 19, 2013 order. The
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order further stated that the circuit court had “considered the Motions to Dismiss in
regards to the Amended Complaints” and that “[t]here is no reason to delay the
enforcement or appeal of this Order.” This appeal followed.
¶ 31 ANALYSIS
¶ 32 The central issue in this appeal, which is common to all four cases before us, is
whether the circuit court erred in dismissing plaintiffs’ claims that Public Act 97-695
violates the pension protection clause of the Illinois Constitution of 1970 (Ill. Const.
1970, art. XIII, § 5). Those claims were challenged by defendants and dismissed by the
circuit court under section 2-615 of the Code (735 ILCS 5/2-615 (West 2012)).
¶ 33 A motion to dismiss under section 2-615 challenges the legal sufficiency of a
complaint. Bonhomme v. St. James, 2012 IL 112393, ¶ 34. In ruling on such a motion, a
court must accept as true all well-pleaded facts in the complaint, as well as any
reasonable inferences that may arise from them. Id. The critical inquiry is whether the
allegations of the complaint, when construed in the light most favorable to the plaintiff,
are sufficient to establish a cause of action upon which relief may be granted. Id. A
cause of action should not be dismissed under section 2-615 unless it is clearly apparent
from the pleadings that no set of facts can be proven that would entitle the plaintiff to
recover. Khan v. Deutsche Bank AG, 2012 IL 112219, ¶ 47. Our review of an order
granting a section 2-615 motion to dismiss is de novo (id.), as is our review of a
determination as to the constitutionality of a statute (Cwik v. Giannoulias, 237 Ill. 2d
409, 416 (2010)).
¶ 34 Statutes are presumed to be constitutional, and the party challenging the validity of
a statute bears the burden of rebutting this presumption. Hope Clinic for Women, Ltd. v.
Flores, 2013 IL 112673, ¶ 33. In addition, this court has a duty to construe a statute in a
manner that upholds its validity and constitutionality if such a construction is
reasonably possible. Cwik, 237 Ill. 2d at 416.
¶ 35 The question of whether the pension protection clause applies to an Illinois public
employer’s obligation to contribute to the cost of health care benefits for employees
covered by one of the state retirement systems presents an issue of first impression in
this court. 2 Resolution of this issue requires that we determine the scope of the
2
Two trial courts have addressed this issue and reached divergent conclusions. See Marconi v. City
of Joliet, No. 10-MR-165 (Cir. Ct. Will Co. July 21, 2011), rev’d and remanded on other grounds, 2013
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protections afforded by article XIII, section 5, which presents a question of
constitutional interpretation.
¶ 36 The construction of constitutional provisions is governed by the same general
principles that apply to statutes. People ex rel. Chicago Bar Ass’n v. State Board of
Elections, 136 Ill. 2d 513, 526-27 (1990). Our objective when construing a
constitutional provision is to determine and effectuate the common understanding of
the citizens who adopted it (Committee for Educational Rights v. Edgar, 174 Ill. 2d 1,
13 (1996)), and courts will look to the natural and popular meaning of the language
used as it was understood when the constitution was adopted (Hamer v. Board of
Education of School District No. 109, 47 Ill. 2d 480, 486 (1970)). Where the language
of a constitutional provision is unambiguous, it will be given effect without resort to
other aids for construction. Graham v. Illinois State Toll Highway Authority, 182 Ill. 2d
287, 301 (1998). In addition, it is proper to consider constitutional language “in light of
the history and condition of the times, and the particular problem which the convention
sought to address ***.” Client Follow-Up Co. v. Hynes, 75 Ill. 2d 208, 216 (1979)).
“Moreover, *** to the extent 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.” Prazen v. Schoop, 2013 IL 115035, ¶ 39; accord Shields v. Judges’
Retirement System, 204 Ill. 2d 488, 494 (2003); Matsuda v. Cook County Employees’ &
Officers’ Annuity & Benefit Fund, 178 Ill. 2d 360, 365-66 (1997).
¶ 37 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.
¶ 38 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
IL App (3d) 110865; Underwood v. City of Chicago, No. 13 C 5687, 2013 WL 6578777, at *5-11 (N.D.
Ill. Dec. 13, 2013).
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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.
¶ 39 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.
¶ 40 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”).
¶ 41 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
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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. See Prazen, 2013 IL
115035, ¶¶ 37-38.
¶ 42 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. See McNamee v. State of Illinois, 173 Ill. 2d 433, 439
(1996); Buddell v. Board of Trustees, State University Retirement System, 118 Ill. 2d
99, 102 (1987); Felt v. Board of Trustees of the Judges Retirement System, 107 Ill. 2d
158, 160-63 (1985); Peters v. City of Springfield, 57 Ill. 2d 142, 150-52 (1974). 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).
¶ 43 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).
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¶ 44 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.
¶ 45 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).
¶ 46 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
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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)).
¶ 47 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).
¶ 48 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
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differently from the other benefits of pension and retirement system membership then
in effect.
¶ 49 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,
§ 2. 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.
¶ 50 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.
¶ 51 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
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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.
¶ 52 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.
¶ 53 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.
¶ 54 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.
¶ 55 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
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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.
¶ 56 CONCLUSION
¶ 57 For the foregoing reasons, we conclude 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 the General Assembly was precluded from diminishing or impairing
that benefit for those employees, annuitants, and survivors whose rights were governed
by the version of section 10 of the Group Insurance Act that was in effect prior to the
enactment of Public Act 97-695. Accordingly, the circuit court erred in dismissing
plaintiffs’ claims that Public Act 97-695 is void and unenforceable under article XIII,
section 5.
¶ 58 Our holding that plaintiffs are entitled to proceed on their pension protection clause
claims obviates the need to address the sufficiency of their remaining claims. Because
plaintiffs have obtained all the relief that they seek, any comment on their other claims
would be advisory and in conflict with traditional principles of judicial restraint. See In
re Alfred H.H., 233 Ill. 2d 345, 351 (2009) (recognizing that Illinois courts generally do
not consider issues where the outcome will not be affected, regardless of how those
issues are decided).
¶ 59 The judgment of the circuit court of Sangamon County is reversed, and the cause is
remanded for further proceedings.
¶ 60 Circuit court judgment reversed.
¶ 61 Cause remanded.
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¶ 62 JUSTICE BURKE, dissenting:
¶ 63 I disagree with the majority’s holding that the pension protection clause protects
more than pensions. I also disagree with the majority’s disposition of this case, which is
unclear. I therefore respectfully dissent.
¶ 64 Pension Protection Clause
¶ 65 The primary issue presented in this case is the scope of article XIII, section 5, of the
Illinois Constitution (Ill. Const. 1970, art. XIII, § 5). That provision, which is titled
“Pension and Retirement Rights,” is commonly referred to as the pension protection
clause. The clause provides: “Membership 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.
¶ 66 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.
¶ 67 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
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amount of wages or salary of pensioner.’ ” (quoting Black’s Law Dictionary 1134 (6th
ed. 1990))).
¶ 68 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.
¶ 69 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.
¶ 70 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
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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.
¶ 71 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” (supra ¶ 38), is “conditioned on” (supra ¶ 40), “flows directly from”
(supra ¶ 40), or is “attendant to” (supra ¶ 41), 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.
¶ 72 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.
¶ 73 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.
¶ 74 Unsurprisingly, nothing in the constitutional debate regarding the pension
protection clause supports the majority’s reading of the provision. As the majority
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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.
¶ 75 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.
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¶ 76 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.
¶ 77 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. See,
e.g., Buddell v. Board of Trustees, State University Retirement System, 118 Ill. 2d 99,
106-07 (1987); Felt v. Board of Trustees of the Judges Retirement System, 107 Ill. 2d
158, 163-64 (1985). In In re Lippman, 487 N.E.2d 897 (N.Y. 1985), 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. Id. 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. Id.
¶ 78 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
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contributions was challenged as a violation of the New York Constitution’s pension
protection clause, which is virtually identical to that of Illinois. Id.
¶ 79 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.
¶ 80 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.
¶ 81 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,
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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.
¶ 82 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.
¶ 83 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.
¶ 84 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
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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.
¶ 85 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.
¶ 86 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.¶ 87 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
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fact, the legislature has repeatedly modified the terms of the benefits provided under
the Group Insurance Act, including reducing them on multiple occasions.
¶ 88 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.
¶ 89 The Majority’s Disposition of This Case
¶ 90 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. Supra ¶ 57. 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.
¶ 91 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.” Supra ¶ 58.
¶ 92 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
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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.
¶ 93 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.
¶ 94 For the foregoing reasons, I respectfully dissent.
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