By Mark Glennon:
If Illinois someday had the political will to fix its broken pension system, could it amend the state’s constitutional pension protection clause and proceed with reforms that modified benefits now protected?
Reform opponents say no, without qualification. If we took that route, they say, courts would still invalidate the reform as a constitutionally impermissible impairment of contracts under what’s called the Contract Clause.
They are wrong. While the issue would be litigated, chances are high that reform would prevail and those chances improve every day. Here’s why:
A state constitutional amendment, unquestionably, would eliminate all state law issues as long as it were worded broadly enough to do so. It would supersede not just the pension protection clause but everything else in state law, including the state’s own constitutional Contract Clause.
But this route to reform would still be challenged under the United States Constitution’s Contract Clause. It’s that federal law issue that reform opponents really base their argument on, and that’s where the issue is.
However, the federal constitutional ban on contract impairment is not absolute. The United States Supreme Court has made clear that contracts may be impaired if there is a significant and legitimate public purpose behind the contract adjustment, and the adjustment of “the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation’s] adoption.”
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