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.

Chicago pushes to change city pensions, but workers push back

Chicago Mayor Rahm Emanuel is pushing to cut costs associated with the city’s pension system, which is among the unhealthiest in the nation. But city workers are pushing back—with the help of a powerful coalition of unions.

Mayor Emanuel is staring at tens of billions of dollars in unfunded pension liabilities, and has warned that deep changes to the pension system or sharp increases in taxes are likely on the horizon.

But We Are One Chicago, a coalition of public unions that represent the city’s teachers, police and firefighters, and other municipal workers, stands in stark opposition to the idea of pension cuts.

The group instead supports various tax measures to help fill the city’s funding shortfall, including expanding the sales tax, raising tax rates for higher earners and closing corporate tax loopholes.

ABC talked to city workers about their grievances:

“I keep saying that I feel that we’ve been robbed that someone is stealing from us,” said retired teacher Patricia Boughton.

“I paid my money into the pension and the employment contract was that I would receive a pension,” said firefighter Tom Ruane.

“It is wrong to blame us for wanting what is due us,” retired nurse Helen Ramirez said.

Chicago currently owes $18, 596 in pension debt for every resident, including children, of the city.

The Political Economy of Unfunded Public Pension Liabilities

This paper applies a public choice approach to the problem of unfunded pension liabilities and adopts the methodology of Congleton and Shughart (1990) to model underfunding of state-level public pension plans using the median voter theorem, along with the theory of “capture” by special interest groups, and a combined model of the two.