Two of the states beset by the most intractable state pension problems have hit roadblocks in their efforts to address those issues. A circuit court judge has declared the law enacted in Illinois to reform its underwater pension system unconstitutional, and the Government Accounting Standards Board has issued a report that says New Jersey’s pension system is in even worse shape than had been thought.
Illinois had a net pension liability in 2013 of nearly $200 billion; on Dec. 5, 2013, the state enacted a law reforming the pension system. But on Nov. 21, Sangamon County Circuit Court Judge John Belz ruled that law violates the state constitution. According to Crain's Chicago Business (free registration required), Belz said that the law broke Illinois’ constitutionally protected promise to its employees concerning their pension benefits; and that the state cannot do that."
The case is being appealed to the state supreme court, and Illinois Attorney General Lisa Madigan is asking the court to expedite its ruling. But that does not dispel the uncertainty that now clouds state finances while the litigation proceeds.
And Reuters reported that on Nov. 25, New Jersey released a document that says that one of its main pension funds will not have enough money to cover expected benefit payments in a decade. Not only that, the Government Accounting Standards Board (GASB) has more bad news for the Garden State. GASB says that under the new pension accounting standards it has issued, New Jersey’s pension system is only 44% funded for fiscal year 2014; it had stood at 63% under the actuarial methods that had been used before.