Tag: reduce COLAs

Second Lawsuit Filed Against Chicago Pension Changes

chicago

A second lawsuit has been filed against Chicago, challenging the pension cuts passed by the state this year.

The pension changes raise contribution rates for employees and employers, and reduce COLAs. The changes apply to members of the Chicago Municipal Employees’ Annuity & Benefit Fund and Chicago Laborers’ Annuity & Benefit Fund.

From Reuters:

Litigation seeking to derail changes to Chicago public worker pensions on constitutional grounds ensnared a second city retirement system on Monday.

Attorney Clint Krislov said he filed a lawsuit in Cook County Circuit Court on behalf of members of the city’s pension fund for laborers. That lawsuit followed one filed Dec. 16 by a coalition of labor unions against Chicago’s municipal pension fund.

An Illinois law enacted earlier this year for the two funds requires higher worker contributions and limits cost-of-living increases for retirees. The lawsuits contend the law violates a prohibition in the Illinois Constitution against reducing public worker retirement benefits.

Cook County Associate Judge Rita Novak on Monday set a hearing on the unions’ motion for a temporary restraining order in the municipal fund case for Jan. 28 and 30.

[…]

Like Illinois, Chicago is arguing that its so-called police powers to provide essential services to residents trump constitutional protections for pensions.

[…]

Under the law that takes effect on Thursday, Chicago’s payments to its two funds increase over five years. Workers’ current contributions of 8.5 percent of earnings rise to 11 percent over five years. Instead of receiving an annual 3 percent cost-of-living increase, retirees will receive increases tied to inflation. The increases will be skipped in certain years.

Mayor Rahm Emanuel has warned that the funds face insolvency within nine to 17 years unless changes are made. The funding shortfall is $8.4 billion for the municipal system and $1 billion for the laborers system. Police and fire pensions were not affected by the law.

The Chicago Municipal Employees’ Annuity & Benefit Fund and Chicago Laborers’ Annuity & Benefit Fund manage a combined $6.7 billion in assets.

 

Photo by bitsorf via Flickr CC LIcense

Emanuel Confident Pension Plan Will Survive Lawsuit

Rahm Emanuel

Four unions on Tuesday filed a lawsuit challenging Chicago Mayor Rahm Emanuel’s plan to increase pension contributions for city employees and reduce COLAs.

But Emanuel said Thursday he thinks the plan will pass legal muster, in part because he worked with dozens of unions to formulate it.

From the Chicago Sun-Times:

Two days after four unions followed through on their threat to challenge the mayor’s plan, citing the same constitutional guarantee at the core of the state case, Emanuel argued that he had no choice but to raise employee contributions by 29 percent and sharply reduce cost-of-living benefits.

“We have to do the tough things, the necessary things so people can know that they’re gonna have a retirement, which they didn’t know before because we weren’t doing and they weren’t doing the tough, necessary things to get the pension systems right,” the mayor said.

“We are both preserving and protecting the pension and doing it in a responsible way that brings both reform and revenue together to solve the problem . . . They’re challenging it, but I know we took on the challenge of under-funded pensions and addressed it head-on in a responsible way.”

Emanuel has argued repeatedly that the Chicago pension reform bill is different from the state legislation because the city changes were negotiated with and agreed to by city unions.

On Thursday, he hammered away at that point.

“Twenty-eight of 31 unions agreed to work with us . . . and 11 of them stood up and said they don’t agree with the lawsuit,” the mayor said.

“I think we were actually preserving [their pensions]. And I know the union leaders who worked with us agree because that’s why they agreed to it.”

The four unions that filed the lawsuit: Teamsters Local 700, AFSCME Council 31, the Chicago Teachers Union, and the Illinois Nurses Association.

 

Photo by Pete Souza