Tag: Illinois pension reform

Illinois Supreme Court consolidates lawsuits against pension reform

It could be a long time before the constitutionality of Illinois’ pension reform law is argued in the halls of the state’s Supreme Court. But now that day might come sooner than previously thought.

The Illinois Supreme Court used its authority today to improve the efficiency of the legal battles surrounding the state’s pension reform law by consolidating all four of the lawsuits into one case.

Four separate lawsuits had been already been filed against the reform law, which was passed in December and goes into effect July 1, 2014 but could be delayed by the lawsuits.

The State Journal Register fills us in on some of the background:

State lawmakers last year approved reforms designed to save the state $160 billion in pension payments over the next 30 years and wipe out the $100 billion pension debt.

The reforms change the 3 percent compounded annual raises in pension benefits, raise the retirement age and limit the salary on which a pension can be earned.

The reform bill also cut by one percentage point the amount of contributions workers must make toward their pensions. Pension reform proponents believe that “consideration” in exchange for lowering benefits makes the reforms constitutional.

Retired teachers, retired state workers and a coalition of public employee unions all filed lawsuits contending the change violates the pension protection clause of the state Constitution. That clause calls pension benefits an “enforceable contractual relationship” between government and workers and says the benefits cannot be “diminished or impaired.”

Attorney Don Craven, who filed one of the consolidated lawsuits on behalf of the Illinois State Employees Association Retirees, told the Journal Star that the consolidation could end up producing a speedier resolution, because cases move more quickly in Sangamon County than in Cook.

Major unions sue Illinois over pension overhaul

It was expected, and now it has arrived: a lawsuit has landed in the lap of a Sangamon County Circuit Court judge which seeks to overturn Illinois’ massive pension reform plan signed into law last month.

The lawsuit was filed by We Are One Illinois, a coalition of unions including the Illinois AFL-CIO, the American Federation of State, the Service Employees International Union, the Illinois Federation of Teachers, County and Municipal Employees, the Illinois Education Association and others.

The lawsuit, like the ones before it, centers on a provision in the Illinois Constitution that says pension benefits represent a “contractual relationship” and may not be “diminished or repaired”.

The Associated Press recaps the provisions of the reform law:

The plan reduces the annual cost-of-living increases for retirees and raises the retirement age for workers 45 and younger, giving some workers the option of freezing their pension and participating in a 401(k)-style contribution plan. It also puts some savings back into the pension funds and directs money from pension bond payments to the retirement systems after those bonds are paid off in 2019.

Lawmakers also included two components they say were intended to improve the plan’s odds of surviving a legal challenge: a 1 percent decrease in employee contributions and a funding guarantee, which allows the systems to sue the state if lawmakers don’t provide Illinois’ payments to the accounts.

The law was expected to take effect on June 1, 2014. But the lawsuit will likely delay implementation of the reforms, as the lawsuit asks the court to delay the law until the case is decided.

Teachers group first to challenge Illinois reform law

Illinois’ sweeping pension reform law, passed earlier this month, was bound to rustle some feathers. Now, the first lawsuit against the new legislation has been filed in the Cook County Circuit Court.

The Illinois Retired Teachers Association filed a class-action lawsuit Friday challenging the constitutionality of the law, which limits cost-of-living increases, caps the amount of salaries eligible for retirement benefits and raises retirement ages for many current workers.

The challenge centers on a provision in the Illinois Constitution which states that public pensions represent “an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Illinois is one of seven states that protect pensions via constitutional provisions, and one of only a handful that constitutionally protect both accrued and future benefits—which makes it nearly impossible for the state to curb its unfunded liabilities.

This lawsuit is likely only the first of many to be filed against the law. The Illinois Education Association and the Illinois Federation of Teachers have said they both plan to file lawsuits in 2014 on behalf of their members.

The law, titled SB1, is designed to save Illinois $160 billion over the next 30 years and proponents claim the law will lead to a fully funded pension system by 2044.

Landmark Illinois Pension Reform Signed Into Law

Illinois’ pension crisis has been decades in the making, but lawmakers for years seemed content to push the politically sensitive issue further down the road. While other states were grappling with solutions, Illinois was shorting its payments to the state’s five pension systems—or skipping them altogether.

Those decisions proved costly, as the state’s credit rating was repeatedly downgraded and now sits as the worst in the country. In the meantime, annual pension payments ballooned to $6 billion in 2013, representing 20% of the general fund’s budget and siphoning money from education and social services.

Then, late last month, after months of meetings, closed-door negotiations and special sessions, lawmakers emerged with a proposed solution: Senate Bill 1, a sweeping pension reform law which aims to save the state $30 billion over the next 30 years and fully fund its pension system by 2044.

Illinois Governor Pat Quinn signed the bill into law during a private ceremony Thursday.

The specifics of the law, according to The Associated Press:

Under the new law, automatic, annually compounded 3 percent cost-of-living increases for retirees — considered to be the biggest driver of pension costs — would be replaced with smaller annual adjustments for the highest earners. Some workers would have the option of freezing their pension and starting a 401(k)-style defined contribution plan. Also, the retirement age will be pushed back for those 45 and younger.

Additionally, the law requires that Illinois make its full annual contributions, and allows the state’s retirement systems to sue if the payments aren’t made.

“Illinois is moving forward,” Quinn said after signing the bill. “This is a serious solution to address the most dire fiscal challenge of our time.”


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