Fitch: Another Illinois Pension Law Could Be Challenged

Cook County – the largest county in Illinois and home to Chicago – passed a budget this week that included a pension provision aiming to cut down the county’s unfunded pension liabilities.

The budget mandates higher pension payments from the county, which will be paid for by a sales tax increase.

But a Fitch report, released Thursday, says the provision could face a legal challenge.

From Reuters:

Cook County’s plan to significantly boost payments to its pension fund over the amount required by Illinois law could lead to legal challenges by taxpayers, Fitch Ratings said on Thursday.

[Cook County] passed a fiscal 2016 budget on Wednesday that increases its pension payment by $270.5 million over the $195 million required by state law, according to the credit rating agency. Revenue for the bigger payment will come from a 1 percentage point increase in the county’s sales tax that is expected to raise $308 million for the budget.

“The county’s pension strategy is notable, as it includes actuarially determined funding of the pension liability, but appears to ignore the restrictions imposed by the current pension statute, leaving the county vulnerable to potential litigation from taxpayers challenging the increased payments,” Fitch said in a statement.

[…]

Fitch said its negative outlook on the county’s A-plus credit rating includes concerns over the county’s ability to implement an affordable plan to shore up pension funding.

“This plan, if it survives legal testing, could address those concerns; but if legal challenges invalidate it, the county will again become reliant upon state legislative action to improve pension funding,” the rating agency added.

Cook County’s retirement system was 61 percent funded as of 2013.