When a party member dies is there a way to raise them or am I screwed?

Go to a temple to have them raised, if your cleric doesn't know Raise Dead or Resurrection yet. Though, even then it might be a good idea to take advantage of the temples.

As doccarnby said but keep in mind that you cannot raise elven characters. They are dead for good.

It's per the AD&D rules but I don't know why it's in the rules.

Elves can be raised with the resurrection spell or scroll. You can buy resurrection at temples, but it's far more expensive than raise dead.

I think it gives the raised person a permanent one point penalty to constitution, correct?

There's no con penalty for raise dead or resurrection in IWD.

It's quite a relief once your cleric gets a raise dead spell; no more reloading* because someone kicked the bucket! Unless that dead person is an elf, which is why I usually don't use elves in my party. Half-elves can be brought back to life with Raise Dead, so they're okay.

*Of course they don't get any experience if they're still dead after the battle, so reloading is still a good idea. I'm lazy however and there are plenty of monsters to kill anyway.

It should be noted that it is still possible to permanently lose characters if they get hit by something like Disintegrate (careful around those beholders). In such a case the character's portrait doesn't simply go gray as it does with a normal death, but completely disappears. If this happens it's usually time to hit reload.