 But opposing attorneys told Illinois Supreme Court justices that buying that
argument would mean averting their eyes from the explicit wording of the state
constitution and the city’s previous shaky commitment to those pension funds.
The city last year negotiated a deal with 27 of 31 unions to revamp the rules
for its pension funds for laborers and other city workers, excluding police
officers and firefighters, who have their own pension funds.
In return for concessions such as greater contributions from employees and
reduced cost of living allowances for retirees, the city agreed to bolster its
contributions to the funds.
In July, Cook County Circuit Court Judge Rita Novak voided the deal. She ruled
the plan amounted to a reduction in benefits and violated the Illinois
Constitution’s pension protection clause.
That clause says membership in a public pension system is a contractual
relationship, “the benefits of which shall not be diminished or impaired.”
Chicago’s lead attorney on Tuesday argued the city’s effort actually provides a
net benefit to plan participants and is distinctly different from revisions in
state pension law that the court struck down in May.
“This case is unique; it is different because the act here overwhelmingly
benefits fund participants and avoids insolvency. It does not diminish or impair
pensions under the plain language of the pension clause,” said Stephen Patton.
As things now stand, the funds will become insolvent in a matter of years,
Patton said. But this law obligates Chicago to massively increase its obligation
to pay into the pension funds and will secure their future, he argued.
“In this act, the city steps up and assumes an obligation it never had before,”
Patton said. A secure future for the funds amounts to “a significant benefit to
all of the participants collectively.”
Attorney John Kennedy, representing the laborers’ fund, said, “The bottom line,
your honors, is that the act confers retirement security and certainty for the
laborers fund.”
But plaintiffs’ attorneys argued the city’s plan flies in the face of the plain
language of the pension clause and the court’s own ruling that nullified the
Illinois Pension Reform Act of 2013.
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 “As the court made clear in May, the General Assembly has no
authority to unilaterally diminish pension benefits,” said John
Shapiro, one of the plaintiffs’ attorneys.
Shapiro also argued the city shouldn’t seek judicial favor for
essentially paying what it owes.
“Setting aside money to pay what is already a constitutional
guarantee is not a benefit, new or net,” he argued.
The plaintiffs also attacked the idea that rights of pension plan
participants — especially retirees — were not individual, but
collective, and could be bargained away.
Attorney Clint Krislov said the entire approach to the legislation
amounted to the city and pension systems treating the law with a
cavalier attitude akin to “we’re gonna do this by a tag team deal
where we get a bunch of people to sign on as some sort of rump group
… and that should satisfy.”
The court took the matter under advisement and will announce its
decision later.
The justices’ questions were mostly put to the city and fund
attorneys and at times seemed skeptical of the city’s position.
“You’re saying that the constitutional guarantee that promises
benefits will be paid is limited by whatever amount there is in the
pension fund and, if the pension fund runs out of money, that
guarantee no longer applies?” asked Justice Mary Jane Theis.
If the court does hold the law invalid, Chicago’s financial status
appears headed deeper into uncharted territory.
The two pension systems at issue in Tuesday’s hearing — the
municipal and laborers — are underfunded by about $9 billion and are
projected to fail in roughly ten years if the shortfall is not
addressed. All told, Chicago’s pension funds are nearly $20 billion
short.
Chicago Mayor Rahm Emanuel’s 2016 budget plan includes a package of
tax hikes — including a $543 million property tax increase over four
years — aimed largely at addressing the city’s debt, but it requires
mechanisms such as those in the disputed pension deal.
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