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Illinois Supreme Court Rules Rahm Pension Plan Unconstitutional

By Sophie Lucido Johnson in News on Mar 24, 2016 8:51PM

City Hall, via senor codo/Flickr

The Illinois Supreme Court has struck down two lower court rulings rulings Thursday, adding further injury to the state's desperate attempt to temper the increasingly dire (and frankly embarrassing) budget crisis. The law sought to hastily shrink the $8 billion shortage in two overdrawn pension funds. The law put greater pressure on the city to pay off the debt through increased taxes, but it also limited promised benefits and required higher payments from roughly 61,000 current and retired municipal civil servant workers.

The law forced the city to significantly ramp up its taxpayer-fueled contributions, but also cut benefits and required larger contributions from about 61,000 current and retired municipal civil servant workers. The high court unanimously sided with workers who sued the city, arguing that the law violated the Illinois Constitution's protections against reducing promised pension benefits.

The law concerned a debt that began when the 2011 state budget crisis resulted in the state's failure to pay out promised benefits. About 24,000 state employees—including teachers, librarians, and health care aides—were promised a 2 percent raise in July 2011, as part of four-year contract negotiated by the American Federation of State, County and Municipal Employees (AFSCME). The state agreed to the contract, and then-Governor Pat Quinn budgeted for the increases, but could not pay them when the legislature failed to appropriate the money.

The law would have altered back pay of previously promised benefits; the union argued that failure to compensate workers previously negotiated back pay violated the Illinois Constitution's protection against reducing promised benefits, and sued the state. The Supreme Court's opinion, backed by six of seven justices, sided with the employees, maintaining that the state constitution requires legislative sign-off on all spending matters — that includes union pay raises negotiated with the executive branch.

Writing for the majority, Justice Mary Jane Theis cited a precedent that stated that “when labor representatives bargain with executive agencies, they do so with the knowledge that any agreement reached will be affected by the General Assembly’s appropriation power.”

Mayor Rahm Emanuel issued a statement on the ruling expressing his disappointment and indicating a reluctant return to the drawing board:

“Though disappointing, this ruling does not change my commitment to ensuring employees and retirees have a secure retirement without placing the full burden on Chicago taxpayers. While I believe SB1922 was the right pension reform plan for retirees and taxpayers, my administration will continue to work with our labor partners on a shared path forward that preserves and protects the municipal and laborers’ pension funds, while continuing to be fair to Chicago taxpayers and ensuring the City’s long-term financial health.”

On the other hand, the ruling is a major victory for public sector workers.

"This ruling makes clear again that the politicians who ran up the debt cannot run out on the bill or dump the burden on public-service workers and retirees instead," the unions said in a joint statement. Without these changes, the city estimates that the liability in the municipal and laborers' funds would grow $900 million a year. At that rate, the municipal fund would be totally worn out by 2026; the laborers' fund would meet the same fate in 2029.