The Illinois Supreme Court set off some pre-holiday fireworks ruling Thursday that the state constitution protects health benefits for retired public workers — even though the constitution’s so-called pension protection provision does not specifically mention healthcare coverage.
The state high court said that subsidized healthcare is one of the benefits of membership in the state’s public pension systems so it falls within the broad ambit of the clause, which bars impairment of state employees’ pension and retirement benefits.
The ruling in Kanerva v. Weems aligns Illinois with Hawaii and Alaska, the two other states that have construed constitutional protection for public pensions to encompass healthcare benefits. Other states, most notably New York, have held that similarly phrased clauses shielding state workers’ pensions do not prohibit states from shifting healthcare costs onto retirees.
As Reuters reported over the weekend, the state supreme court’s decision does not directly strike down a 2012 Illinois law requiring retirees to contribute part of the cost of their healthcare coverage, but reinstates a consolidated challenge to the law by public workers’ unions. The governor’s office has said it is still confident the law will be deemed constitutional. Other experts seemed dubious that the 2012 pension reform law would survive.
Assuming it does not, will holders of Illinois debt end up feeling the pain of the state’s constitutional obligation to cover the healthcare costs of retired public employees? And if so, is the pain likely to spread to debt holders in other states whose retirees’ benefits are protected by similar provisions?