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No loophole for you!

Friday, Mar 25, 2016

* The Tribune on yesterday’s Supreme Court pension ruling

The city’s top attorney, Corporation Counsel Stephen Patton, had tried to squeeze the city through a loophole. He contended that the [pension] funds themselves, and not the city, were solely responsible for paying out benefits to retirees.

But Justice Theis considered the argument — benefits would be severely diminished if the funds went broke — and concluded that scenario “would lead to an absurd and unjust result.”

“The General Assembly and the city have been on notice since the ratification of the 1970 constitution that the benefits of the membership must be paid in full, and that they must be paid without diminishing or impairing them,” she wrote.

Clint Krislov, who represented the retired workers that sued, called that part of the court opinion “perhaps the most significant.”

That “eliminates the city’s threat that we’ll just let the funds go bankrupt, and you’ll be stuck with a claim on a fund that has no money. This makes it clear that the city is going to be on the hook to make sure that these pensions are paid,” Krislov said.

* More from the Sun-Times

“The city was essentially threatening and saying, ‘If you don’t go along with this, we’re going to walk away from the funds.’ The city can’t do that now. This puts a dagger in that argument,” Krislov said.

- Posted by Rich Miller        

20 Comments
  1. - RNUG - Friday, Mar 25, 16 @ 10:23 am:

    The IL SC has said benefits have to be paid whdn due since the IFT ruling, but never as forcefully or explicitly.

    The language used in this case was the judicial equivalent of “We’re starting to get tired of repeating ourselves. What part of Kanerva, etc., did you not understand?”


  2. - Norseman - Friday, Mar 25, 16 @ 10:26 am:

    BANKRUPTCY! The new GOP ideal for state and local governments.


  3. - Puzzled - Friday, Mar 25, 16 @ 10:29 am:

    =“The city was essentially threatening and saying, ‘If you don’t go along with this, we’re going to walk away from the funds.’ The city can’t do that now. This puts a dagger in that argument,” Krislov said.=

    So explain to me what happens when the City doesn’t fund the plans and they go belly up in a few years? Does a court order a dedicated tax increase? Alderman go to jail if they don’t pass it?


  4. - Honeybear - Friday, Mar 25, 16 @ 10:29 am:

    I am sure the Greatest Generation is rolling over in their graves right now. The ideals of shared sacrifice and common good are dead.


  5. - Rich Miller - Friday, Mar 25, 16 @ 10:35 am:

    === Does a court order a dedicated tax increase?===

    Probably not.


  6. - A guy - Friday, Mar 25, 16 @ 10:35 am:

    ===Does a court order a dedicated tax increase?===

    The law is even more clear on this question. No.


  7. - northernwatersports - Friday, Mar 25, 16 @ 10:37 am:

    Finally! Maybe? Will the City and GA look in the mirror this morning and say, ‘Well, guess I gotta find some more money for those pensions today.’ Somehow I think denial is still the diagnosis of the day.
    Norseman = Perfect! Can I get that on a bumper sticker?
    I assume that IF the funds become depleted, that the Courts have some type of case history to guide them….embargo assets? order comptroller to issue checks to annuitants before vendors or bondholders? Now I’m curious….


  8. - Name/Nickname/Anon - Friday, Mar 25, 16 @ 10:42 am:

    IF the Fund becomes insolvent, retirees living month to month will suffer as the courts decide how they get paid.


  9. - Politix - Friday, Mar 25, 16 @ 10:47 am:

    Blaming the courts could be a winning tax increase strategy.


  10. - RNUG - Friday, Mar 25, 16 @ 10:50 am:

    == Does a court order a dedicated tax increase?==

    No, but they will strongly suggest / order that current general revenue must be used to pay the pensions.

    What the courts will do if that suggestion isn’t followed is unknown; possibilities would be fines, comptempt citations, possible detention of official(s) until the order is followed, or similar actions.


  11. - walker - Friday, Mar 25, 16 @ 10:58 am:

    Honeybear: My own exact thought this morning.

    What would the “greatest generation” think of the weasels, cowards, and self-centered takers, that seem to be expressing themselves in large numbers in our current political campaigns?


  12. - Maximus - Friday, Mar 25, 16 @ 11:00 am:

    If the fund becomes insolvent this will likely play out the same way Detroit did. The pensioners ended up taking a haircut but I don’t believe it was a big one.


  13. - DuPage Saint - Friday, Mar 25, 16 @ 11:09 am:

    The Supreme Court addressed this issue in a footnote to the original pension case basically inviting pensioners to sue the state to compell funding.
    3Consistent with an earlier opinion by this court in McNamee v. State, 173 Ill. 2d 433 (1996), and comments at the Constitutional Convention, we did not, however, foreclose the possibility that a direct action could be brought by pension system members to compel funding if a pension fund were on the verge of default or imminent bankruptcy. Sklodowski, 182 Ill. 2d at 232-3


  14. - Anon - Friday, Mar 25, 16 @ 11:14 am:

    ===So explain to me what happens when the City doesn’t fund the plans and they go belly up in a few years?===

    “Belly up” is an idiom that refers to death. If the city files bankruptcy it’s not as if the city, all of it’s assets, and all of the property within it’s boundaries are suddenly going to disappear.

    If the City of Chicago refuses to fund their pensions and then refuses to appropriate money to pay the benefits, they’ll get sued by the beneficiaries and the court will tell them to pay. It will not tell them how to pay. Just to pay.

    It’s a pretty straight forward concept. Cities should collect the tax revenue from the people they provide services to so that they can pay for the services that they provide.


  15. - Anon - Friday, Mar 25, 16 @ 11:20 am:

    ===I am sure the Greatest Generation is rolling over in their graves right now. The ideals of shared sacrifice and common good are dead.===

    Not to be mean to dead people, but the state’s structural budget gap and the under funding of pensions has been around for so many decades that the Greatest Generation isn’t exactly innocent in the matter.

    In fact, starting in 1984, the state started excluding all federally taxed retirement income from their income tax base. So, a majority of the Greatest Generation spent their golden years in this state without contributing to the income tax base.

    From 1993 to 2013, in 2013 dollars, that tax expenditure cost the state almost $21 billion dollars — and 1993 was just the first year the state started reporting those records.

    The state and to a lesser extent, the City of Chicago, are in this situation because of several generations of kicking the can down the road.

    It’s just gotten to the point that it has to be fixed and many of our political leaders don’t really want to have the come to god meeting about taxes.


  16. - Juvenal - Friday, Mar 25, 16 @ 11:32 am:

    === Blaming the courts could be a winning tax increase strategy. ===

    It was a better strategy for the state a year ago, but it is still a viable strategy for the city.

    “Blame” isn’t the route I would go though.

    Recognize the facts.

    If you want to “blame” someone as an alderman, blame the Governor.

    If school funding reform and sales tax reform had been enacted already, the city’s problems would be much more manageable.


  17. - Mama - Friday, Mar 25, 16 @ 11:33 am:

    It appears they just touched on the courts last nerve.


  18. - a drop in - Friday, Mar 25, 16 @ 11:49 am:

    I’m watching the court in Kansas, which is ordering the legislature to more equally fund the school system. We will see if the legislature says no and what happens then. I think this is uncharted territory.


  19. - RNUG - Friday, Mar 25, 16 @ 12:01 pm:

    == The pensioners ended up taking a haircut but I don’t believe it was a big one. ==

    Based on current and past rulings, not in Illinois. Detroit outcome was a result of bankruptcy. The employees / retirees here will be kept whole.

    But I could see Chicago trying to do a claw-back on some of those bond and lease deals that had ex essive fees and rates.


  20. - Juvenal - Friday, Mar 25, 16 @ 2:03 pm:

    RNUG nails it again.

    === But I could see Chicago trying to do a claw-back on some of those bond and lease deals that had ex essive fees and rates. ===

    There is nothing I enjoy more than a good fight between the one-half-a-percenters and the one-tenth-a-percenters.


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