 Citing precedent including its own recent decisions, the court found the plan
violated the pension protection clause of the 1970 Illinois Constitution. That
clause says membership in a public pension is a contractual relationship, “the
benefits of which shall not be diminished or impaired.”
And the changes the plan sought “unquestionably diminish the value of the
retirement annuities the members of (the two funds) … were promised when they
joined the pension system,” Justice Mary Jane Theis wrote on behalf of the
court.
The city in 2014 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.
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. The two funds are underfunded by about $9 billion and are
projected to fail in roughly a dozen years if nothing is done.
Thursday’s ruling by the state high court upheld Cook County Circuit Judge Rita
Novak’s earlier ruling that the legislation allowing Chicago’s plan was
constitutionally faulty.
The justices flatly rejected the city’s argument that increased city funding for
the pension plans amounted to a benefit for plan members. Further, the court
said the city and state well know government is obligated to ensure pension
plans are funded.
The court said, “The General Assembly and the city have been on notice since the
ratification of the 1970 Constitution that the benefits of membership must be
paid in full, and that they must be paid without diminishing or impairing them.”
The court also rejected the argument that the changes in the city’s plan had
been bargained.
“In this case, it is undisputed that the unions (that agreed) were not acting as
authorized agents within a collective bargaining process,” Theis wrote.
None of the justices dissented, with the court’s ruling coming from five of the
seven judges. Two justices, Charles Freeman and Anne Burke, took no part in the
decision.
Freeman receives an annuity as the surviving spouse of a city worker. Burke’s
husband is a Chicago alderman and chairman of the city’s finance committee.
Four unions that joined in the fight against the city’s plan, including American
Federation of State, County and Municipal Employees Council 31 and the Chicago
Teachers Union, applauded the ruling.
[to top of second column] |
 “Politicians caused the pension debt by failing to set aside
adequate contributions, in effect borrowing from future retirees to
avoid raising revenue or cutting spending instead,” the unions said
in a joint news release.
Chicago’s unsupported pension debt is estimated at about $20
billion when the police and firefighter funds are included. That
does not include a $9.5 billion liability in the Chicago Public
Schools teachers plan.
Given its debt load, the city has seen its bond rating reduced to
“junk” status by the major rating agencies.
Illinois state government is in a similar, but larger, leaky boat.
The state’s unfunded pension obligation is estimated at more than
$110 billion, and the court last year rejected state government’s
last major effort to address spiraling pension costs.
In its decision, the court did seem to leave the door open for
“consideration,” or the idea that members of an existing pension
plan can agree to changes in exchange for some other incentive.
“The pension protection clause was not intended to prohibit the
legislature from providing ‘additional benefits’ and requiring
additional employee contributions or other consideration in
exchange,” the court wrote.
“Likewise, nothing prohibits an employee from knowingly and
voluntarily agreeing to modify pension benefits from an employer in
exchange for valid consideration from the employer,” the court said.
The justices, however, also noted the intent to modify a plan must
be mutual.
That could give Chicago, the General Assembly and Gov. Bruce
Rauner’s administration some room to work as they try to negotiate
changes or reforms decreasing the city’s and the state’s pension
burdens.
Chicagoans, meanwhile, are left to struggle with $755 million in tax
and fee increases that began being implemented this year, largely to
cover pension costs.
Click here to respond to the editor about this article |
