Chicago pension reform lawsuits put on hold

[February 24, 2015]  CHICAGO, Feb 23 (Reuters) - Lawsuits seeking to void a law aimed at shoring up the finances of two Chicago pension funds have been put on hold pending a ruling by the Illinois Supreme Court on a law affecting state public retirement funds, participants in the litigation said on Monday.

City unions and retirees had been seeking a preliminary injunction to stop the law, which took effect Jan. 1, in Cook County Circuit Court. Meanwhile, the supreme court announced last week it will hear lawsuits against the Illinois pension reforms on March 11.

That triggered a motion by plaintiffs to stay the Chicago proceedings that was approved on Thursday by Judge Rita Novak.

"Given the relative timing of the state and city cases, and because a decision upholding the (Sangamon County) circuit court in the state case could be determinative in the city case, the plaintiffs decided it is sensible to stay further proceedings until the supreme court's ruling is received," said Anders Lindall, a spokesman for American Federation of State, County and Municipal Employees Council 31.
 

The Chicago law requires higher pension contributions from the city and workers in its laborers and municipal retirement funds and limits cost-of-living increases. Two lawsuits filed in December contend it violates a prohibition in the Illinois Constitution against impairing or diminishing public worker retirement benefits.

That provision is behind litigation targeting a law allowing cuts to state worker pensions. A Sangamon County Court judge in November rejected the law on constitutional grounds. The state appealed the ruling to the Illinois Supreme Court, which could release a decision in May.

Illinois has the worst-funded state pension fund, while Chicago is struggling with a huge pension funding burden that led to credit rating downgrades.

During hearings on the preliminary injunction, Chicago's attorney, Richard Prendergast, contended the 2014 law enacted for the city's funds would not be derailed by a supreme court ruling voiding the 2013 law for state pensions because the city's arguments go beyond the need to invoke police powers to ensure the funding of essential public services.

Chicago argues that the law does not unconstitutionally diminish pension benefits because without it the two pension funds would become insolvent in just years. The city's attorneys have also suggested Chicago would not be responsible for retiree payments should the funds run out of money.

"That's a battle we don't think will occur," said Clint Krislov, an attorney for pension fund members.

(Reporting by Karen Pierog; Editing by Dan Grebler)

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