Retirement Plans

Top Illinois Court Denies Chicago Pension Changes

Absent the ruling, Chicago public employees would have had to pay 11% more of their wages toward their retirement.
Katie Kuehner-HebertMarch 24, 2016

The Illinois Supreme Court on Thursday ruled unconstitutional a state law that would have cut the pension benefits of Chicago public employees and make them pay more toward their retirement.

The court upheld an earlier decision by a Cook County judge who found that the 2014 state law — introduced at the behest of Chicago Mayor Rahm Emanuel — violated a clause in the Illinois Constitution that states pension benefits once granted “shall not be diminished or impaired.”

“These modifications to pension benefits unquestionably diminish the value of the retirement annuities [the city workers] were promised when they joined the pension system,” the justices wrote in their opinion. “Accordingly, based on the plain language of the act, these annuity reducing provisions contravene the pension protection clause’s absolute prohibition against diminishment of pension benefits, and exceed the General Assembly‘s authority.”

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The plaintiffs in the suit — the American Federation of State, County and Municipal Employees Council 31, the Chicago Teachers Union, the Illinois Nurses Association, and Teamsters Local 700 – applauded the ruling in an emailed statement to the Chicago Tribune.

“Politicians caused the pension debt by failing to set aside adequate contributions, in effect borrowing from future retirees to avoid raising revenue or cutting spending instead,” the group’s statement said. “At the same time, city workers such as librarians and truck drivers, school social workers, and nurses were faithfully paying their share. They earned, contributed to, and counted on a modest pension — just $32,000 on average — instead of Social Security, for which city employees are not eligible.”

The city was still reviewing the opinion at press time, the mayor’s spokeswoman Kelley Quinn told the Tribune.

Under the state law in question, city employees would have had to contribute 11% more of their wages to their retirement plans, in phases over five years. Moreover, the annual cost-of-living increases for retired workers would have been lowered.

In return, the city would have increased its annual contributions to the pension funds by hundreds of millions of dollars a year.

Taxpayers now might have to face another massive property tax increase to fill the funding shortfall, now $10 billion and growing, according to the Tribune. That would follow the largest property tax hike in “modern Chicago history” to cover a similar funding gap in police and fire pension funds.

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