Excerpts from the CookCountyRecord.com:
The Illinois Supreme Court has once again rejected a legislative effort to modify public employee pension funding rules, emphasizing that any attempt to reduce retirement benefits for public workers violates the state constitution. While acknowledging the real fiscal challenges facing Illinois, the court ruled 5-0 on March 24 that a 2014 Chicago pension reform law, known as Public Act 98-641, is unconstitutional due to its violation of the pension protection clause.
Justice Mary Jane Theis wrote the majority opinion, with Chief Justice Rita Garman and Justices Robert Thomas, Thomas Kilbride, and Lloyd Karmeier joining in. Justices Charles Freeman and Anne Burke chose not to participate in the decision.
This ruling upheld an earlier decision by Cook County Circuit Judge Rita Novak, who had struck down the same pension reform law in 2015, finding it unconstitutional. The law aimed to allow the city of Chicago to restructure how it funds pensions, which had historically been supported by property taxes. Before the reform, employees contributed 8.5% of their income, while the city matched contributions based on a multiplier of 1 or 1.25 times that amount. Retirees received automatic 3% annual increases, regardless of economic conditions.
However, later assessments showed that the city’s pension funds were underfunded. Analysts estimated that without changes, the city’s pension systems would become insolvent within 10 to 20 years. In response, the Illinois General Assembly passed a new law requiring the city to increase its contributions to 90% of actuarial funding levels by 2021. It also gave pension funds the right to sue the city if it failed to meet those obligations.
In exchange, the city could require employees to contribute up to 11% of their pay by 2019, with the possibility of reducing contributions to 9.75% once the funding ratio reached 90%. Additionally, the law would eliminate the automatic 3% annuity increase for retirees, replacing it with a different formula.
Cities employees and retirees challenged the law in court, arguing it violated the state constitution’s pension protection clause, which states that public employee benefits “shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.†The city defended the reforms, claiming they would ensure long-term stability for pensions and provide a net benefit to workers and retirees.
However, the Supreme Court rejected this argument, stating that the law effectively forced employees to pay more and retirees to accept less in exchange for a promise that the city would fund pensions — a guarantee already required by the constitution. The justices emphasized that the 90% funding requirement was not a binding contract but rather a legal tool for pension funds to sue the city, leaving retirees dependent on whatever money the city could allocate.
The court also noted that previous rulings had made it clear that a fiscal crisis does not justify violating the pension protection clause. They warned that allowing such changes would lead to unjust outcomes and undermine the constitutional rights of public employees. “The Illinois Constitution mandates that members of the Fund have a legally enforceable right to receive the benefits they have been promised,†the justices wrote. “Not merely to receive whatever happens to remain in the funds.â€
Additionally, the court dismissed the city’s claim that the law resulted from negotiations with unions, stating that these discussions did not constitute a binding collective bargaining process. The justices concluded that individual retirees and employees had not waived their constitutional rights through these talks. “These negotiations were no different than legislative advocacy on behalf of any interest group,†they said. “The individual members of the Funds have done nothing that could be said to have unequivocally assented to the new terms.â€
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