"The Pension Protection Clause Does Not Compromise the State’s Sovereignty"

“…The Federal Constitution Does Not Prohibit a State From Limiting Its Own Powers Through Its Constitution.

“The issue before this Court is the extent to which the Pension Protection Clause of the Illinois Constitution limits the power of the General Assembly. There is no federal question. Nevertheless, the defendants argue that the ‘reserved powers doctrine’ of the Contract Clause in the federal Constitution prohibits a state from limiting its own powers under its own law. (Def. Br. at 40-45.) The defendants' theory is unprecedented and contrary to basic principles of federalism.

“The reserved powers doctrine merely holds that the federal Contract Clause will not lock a state into a contract that surrenders one of several specific sovereign powers. U.S. Trust Co. of New York v. New Jersey, 431 U.S. I, 23 (1977). The doctrine does not require states to maintain the maximum sovereign powers permitted by the federal Constitution. None of the cases cited by the defendants supports that proposition. In fact, the United States Supreme Court has explicitly invited states to limit their sovereign powers if they so choose. Compare Kelo v. City of New London, Conn., 545 U.S. 469, 489 (2005) (‘We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power.

“Indeed, many States already impose 'public use' requirements that are stricter than the federal baseline. Some of these requirements have been established as a matter of state constitutional law, while others are expressed in state eminent domain statutes’) (footnote omitted) with U.S. Trust Co. of New York, 431 U.S. at 23-24 (recognizing the power of eminent domain as an essential sovereign power).

“The Illinois Appellate Court has likewise recognized that ‘the State is free as a matter of its own law to impose greater restrictions on the police power than those held to be necessary upon federal constitutional standards.’ Parkway Bank & Trust Co. v. City of Darien, 43 III. App. 3d 400, 406 (1976).

“The defendants' reserved powers argument confuses contracts and statutes with constitutions. The reserved powers doctrine addresses the surrender of sovereign powers by contract or statute. See, e.g., U.S. Trust Co. of New York, 431 U.S. at 23-24. This Court, however, is being asked to interpret a constitutional provision. There is no reserved power exception to the specific limits which a state's constitution places on that state's legislature. See, e.g., O'Brien, 219 III. 2d at 100 (‘the General Assembly cannot enact legislation that conflicts with specific provisions of the constitution’); Flushing Natl. Bank v. Municipal Assistance Corp. for City of N.Y., 40 N.Y.2d 731, 740 (N.Y. 1976) (‘the police power which may override statutes is not a higher law which transcends Constitutions as well’).

“The irrelevance of the reserved power doctrine to the interpretation of the Pension Protection Clause is well illustrated by Flushing National Bank, a case arising from the State of New York's efforts in the 1970s to reduce New York City's crushing municipal debt.

“At issue in Flushing National Bank was a law preventing certain short-term municipal noteholders from enforcing their notes in court for a period of three years. Id. at 733. The New York State Constitution contained a clause requiring the City to pledge its ‘faith and credit’ to all debt obligations. The court interpreted the faith and credit clause as an unambiguous commitment, without exception, to pay the notes as they came due—a ‘super contract,’ as the defendants would describe it. Id. at 734-36.

“The New York Court of Appeals held that regardless of the city's ^.fiscal distress and the legislature's claimed ‘police powers,’ the faith and credit clause flatly prohibited the moratorium law. Id. The court further held that the legislature's violation of this constitutional provision could ‘not be justified by fugitive recourse to the police power of the State or to any other constitutional power to displace inconvenient but intentionally protective constitutional limitations.’ Id. at 736.         

“Of particular relevance to the defendants' reserved powers argument, the court explicitly declined to apply federal Contract Clause jurisprudence because ‘Wederal constitutional provisions, especially the impairment clause, cast little light on the State constitutional issues in this case.’ Id. at 740. In other words, the state's constitution, not a contract, limited the legislature's power, so the question of reserved powers was beside the point.

“Here, just as in Flushing National Bank, a constitution, not a contract or a statute, prohibits the legislature from avoiding a financial obligation. Just as in Flushing National Bank, the defendants invoke police powers and a purported fiscal emergency as justification for doing precisely what the State Constitution prohibits. Just as in Flushing National Bank, the federal Contract Clause and the reserved power doctrine are beside the point. Regardless of whether a legislature can surrender its sovereign powers by contract or statute, no reserved sovereign power allows a state legislature to sidestep the plain prohibitions set out in its own constitution…”

from Brief of ISEA RSEA Heaton and Harrison Plaintiffs-Appellees