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RNUG’s analysis of the three pension reform lawsuits filed so far

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Illinois

* I asked “RNUG,” co-winner of our 2013 Golden Horseshoe for best commenter, to take a look at the lawsuits filed so far against the state pension reform law. And here it is…

As everyone should know, last year’s SB-0001, now Public Act 98-0599, “reformed” the Illinois Pension Code. There was an outcry at the time that it was unconstitutional and various groups were expected to challenge the “reform” via lawsuits. We are currently at three pension lawsuits and counting. It is expected that more suits will be filed, since the ones to date don’t cover every possible affected employee or retiree, most notably those employees or retirees governed by bargaining agreements. I look for union groups like AFSCME, the IEA, the IFt and SEIU to jump in at some point.

While I’m trying to get this right, I may miss things or skip over what someone would consider important. I have every confidence that CapitolFax.com readers will find anything I miss or get wrong. I do know, every time I read the filings, I find an additional item or two.

* First to file (12/27/2013) was a group of individual members of the Teachers Retirement System, and they requested class action for members of TRS who are specifically not members in either the Illinois Federation of Teachers (IFT) or the Illinois Education Association (IEA). Their suit was filed in Cook County.

Next to file (1/2/2013) was the Retired State Employees Association (RSEA) plus individual members, and they requested class action for all SERS members (including current employees) and annuitants (retirees and survivors). This was filed in Sangamon County.

A couple of hours later the Illinois State Employees Association Retirees (ISEA-R) and individual members filed, and they requested class action for annuitants in SERS, SURS, GARS and TRS with a minimum of 20 years service. This was filed in Sangamon County as well.

All three lawsuits make common diminishment claims against the constitutionality of the AAI (cost of living adjustment) calculation change, the age change, and the pensionable salary cap. But once you get past those commonalities, there are significant differences in their claims and approaches.

* The Cook County case takes the nuclear approach, maintaining that the Illinois Constitution Pension Clause overrides everything else and citing the relevant history and case law. They also ask for class action status only for non-bargaining group / non-represented retirees. While they make other minor claims, that pretty much sums up their argument. (Side note: among other things, they cite Senate President John Cullerton’s statement about the law likely being unconstitutional.) Their requested relief is simply to declare PA 98-0599 unconstitutional. If it works, great, but I’m not seeing any obvious fall-back position or appeal strategy. The one unique portion of this suit, alongside the request for simple declaratory relief, is a specific request for a jury trial on those issues that can be tried in front of a jury.

* The RSEA case takes a much broader approach, adding claims of a violation of the Equal Protection Clause (since the judges’ retirement system was not changed), Contract Law violations, and additional specific Contract Law violations for the early retirment groups (1991, 2002 & 2005) to the unconstitutional claim made in the first case by the individual TRS retirees. RSEA asks for class action status for all (Tier 1) SERS members and annuitants. They also ask that all monies that would have been paid under the previous flat 3% AAI law that exceed the payments due under PA 98-0599 be escrowed until such time as the case is resolved. That escrow request, if granted, will negate, at least temporarily, any pension fund savings for at least the next fiscal year. This case is also the one with the most supporting documents filed right up front. Reading between the lines of the RSEA claims, I think they are setting up for an appeal under contract law in the federal court system if they were to lose at the Illinois Supreme Court (IL SC) level.

* The ISEA-R case shares pretty much all the same claims the RSEA suit does, puts a couple of individual twists to it, and makes an additional claim or two. What is most different is their definition of a class: all retirees in all state retirement systems except the Judges Retirement System (JRS) with 20 or more years of service and not subject to a collective bargaining agreement. That’s a much broader class than the other two suits. (As an interesting side note, former state Rep. Gwen Klingler is a party to this suit.) They also make an additional promissory (basically implied contract) claim for the various ERI groups. While it isn’t spelled out, with the ERI / 20 year service reference, I’m wondering if this isn’t a second run at the premium free health insurance promise; a lot of people relied on that promise when they accepted the ERI. ISEA-R’s strategy seems to be very similar to the RSEA case, including the escrow request and appearing to set up, if needed, for a federal appeal under contract law.

Personally, as a non-union SERS retiree with more than 20 years service and a RSEA member, I like the approach being taken by both RSEA and ISEA-R. Given the inclusion of much of what the regulars here have discussed the past year, I have to assume the board members and legal counsel for those two cases are daily readers of the Capitol Fax. I’m also guessing that, even though they filed separate suits, these two groups may have discussed some common strategy.

Assuming Rich provides links to all three suits as filed, you should go read them. Hint: on the RSEA suit, you really only need to read the first 20 pages and the last page or two; the rest is supporting documentation.

* And here are links to all three lawsuits…

* Individual teachers suit filed in Cook County

* Retired State Employees Association (RSEA)

* Illinois State Employees Association Retirees (ISEA-R)

posted by Rich Miller
Thursday, Jan 9, 14 @ 9:31 am

Comments

Good analysis as usual. Speaking of Golden Horseshoes…what is the complete list of winners? Thanks.

Comment by Party Thursday, Jan 9, 14 @ 9:43 am
https://capitolfax.com/2013/12/23/and-the-winners-are-7/

Comment by Rich Miller Thursday, Jan 9, 14 @ 9:47 am
At the risk of restating the obvious: RNUG’s ongoing pension reform analysis has been invaluable.

– MrJM

Comment by MrJM Thursday, Jan 9, 14 @ 9:50 am
Rich, your Stable of Experts is going to rival no ones.

Great work by - RNUG -, and thanks for helping all of us wrap our heads around what is going on.

Great stuff.

Comment by Oswego Willy Thursday, Jan 9, 14 @ 9:51 am
Thank you RNUG for your analysis and posts, much appreciated by us retirees.

Comment by Tsavo Thursday, Jan 9, 14 @ 9:53 am
Thanks RNUG for this summary. The line that catches my eye is when you note that The ISEA-R case defines a class as “all retirees in all state retirement systems except the Judges Retirement System (JRS) with 20 or more years of service and not subject to a collective bargaining agreement.” I’m wondering whether you could say more about this part of your analysis. I’m interested in this statement because I’ll retire this year with 19 years in SURS. I do have an IFT contract with my college. I’m supposing it doesn’t apply to me since I do have a CBA.
Thanks again for analysis—you really have a knack for cutting through the language to get to the heart of the issues.

Comment by SURS2014 Thursday, Jan 9, 14 @ 10:00 am
Many thanks for this excellent analysis. And thanks to Rich for providing the platform to make it avaiable.

Comment by Publius Thursday, Jan 9, 14 @ 10:03 am
Thank you for the analysis. The Equal Protection issue and class definition excluding judges seem to underscore the issue of whether the Illinois judiciary has a stake in the outcome of this litigation. Simply crafting reform legislation excluding judges appears insufficient to avoid a judicial conflict of interest arising from these matters proceeding in the Illinois court system. It’ll be interesting to see if the defense raises the issue or the court raises it on its own.

Comment by Cook County Commoner Thursday, Jan 9, 14 @ 10:16 am
Thanks RNUG and Rich for the analysis. The details are most interesting in regards to each lawsuit. Some of my retired educator colleagues are antsy about the We Are One Illinois coalition and when and where they are filing their suit.

It is my understanding from talking to others who are in the loop that the coalition and the associations not in the coalition-and their lawyers-have been in contact with each other and there is/was some sort of coordination between all of them.

Should be an interesting but stressful year with the suits and this being an election year.

Comment by Nearly Normal Thursday, Jan 9, 14 @ 10:17 am
SURS2014 - Thursday, Jan 9, 14 @ 10:00 am:

I’m not sure why ISEA-R included the 20 year service statement. I do have several guesses, one of which I noted above re the health insurance. My other guesses are they picked 20 years because that is a fairly typical service time or they might be planning some kind of argument re vesting in the pension system. Historically, various pension systems (both government and private sector) used to vest at either 8 years or 20 years, and there may be some specific case law (possibly certain IRS pension rules) they intend to bring out in subsequent filings and arguments.

Comment by RNUG Thursday, Jan 9, 14 @ 10:18 am
Thanks so much RNUG.

My amateur guess is that the key arguments will revolve around contract law. The more the plaintiffs prepare for that, and not just assume the simple “diminishment” claim is sufficient, the better for them.

Comment by walker Thursday, Jan 9, 14 @ 10:25 am
Thanks RNUG. I’m in the same boat as you - non-union SERS retiree with more than 20 years. Do you think the court will consider the already-retired different than the still-working, who will now pay less into the system? I see no “consideration” in the law for the already retired.

Comment by Sir Reel Thursday, Jan 9, 14 @ 10:25 am
RNUG, for the sake of full disclosure, are you a party to any of the lawsuits? While I value your opionion, and believe, that whether you’re a party to a current lawsuit, or not, your analysis is objective, it would help if nothing was left to the foil hat crowd to ruminate on.

Comment by PublicServant Thursday, Jan 9, 14 @ 10:28 am
Unless I missed it, I don’t see a contract clause claims under the U.S. Constitution in any of the complaints. I’m not 100% certain, but I think that waives any such claim by these plaintiffs and forecloses any attempt to get into federal court.

Comment by Urbs In Horto Thursday, Jan 9, 14 @ 10:34 am
@Sir Reel, I believe that you’re correct regarding retiree consideration. I mean, after all, employees already tried to sue to force the state to pay annually, and the ISC ruled that even though the state could not be foreced to pay annually, they were responsible for payment as those payments became due.

@CCC - The ISC has, several times, ruled on State Pension issues in the past, I can’t see how your argument of an interest conflict would cause them to recuse themselves this time no matter how much you’d like to see that happen.

Comment by PublicServant Thursday, Jan 9, 14 @ 10:36 am
Another great job by RNUG. To summarize for SURS 2014, the ISEA-R suit includes retirees in SERS, GARS, SURS and TRS. RSEA suit only deals with retirees in SERS. The Retired Teachers suit includes current employees and retirees. The two state retiree suits are only directed at those elements of the law that affect retirees, i.e. the AAI. The IRTA suit challenges all aspects of the law as it pertains to teachers.

A significant point in both state retiree suits is that the AAI is not a COLA and was not intended to be a COLA when enacted.

Comment by Norseman Thursday, Jan 9, 14 @ 10:46 am
PublicServant - Thursday, Jan 9, 14 @ 10:28 am:

I am NOT a plaintiff to any of the lawsuits. I am a dues paying member of RSEA (disclosed above) and part of their requested class, so I’m obviously an indirect party. I don’t think I know any of the named plaintiffs, other than Gwen Klingler who I’ve met once at a fund raiser mnay years ago when she was first running for State Rep. (didn’t contribute). I’m just someone who will be hugely affected by the AAI change since I was a SPSA with lots of years of service and I’m still (barely) under Social Security age.

Comment by RNUG Thursday, Jan 9, 14 @ 10:53 am
Urbs In Horto - Thursday, Jan 9, 14 @ 10:34 am:

Agreed, they did not explicitly make federal claims in these suits, just State contract law. But the way I read it, State contract law is pretty much the federal law, especially when it comes to impairment, so I see a crack there.

Comment by RNUG Thursday, Jan 9, 14 @ 10:56 am
I am a SURS annuitant with only 9 years of service, but this change hurts me as well as those with 20 years or more. Will anyone include me, or must I file myself?

Comment by DavStevens Thursday, Jan 9, 14 @ 11:00 am
Thanks for the links and summary… It will likely all be consolidated because so many people are covered by multiple issues. They really can’t differentiate between union and non-union when it comes to the pension guaranteed because so many have overlapping service credit. This is not just a union issue.

Comment by Liberty First Thursday, Jan 9, 14 @ 11:01 am
Sir Reel - Thursday, Jan 9, 14 @ 10:25 am:

Maybe.

The most recent case I’m familiar with that touched on retiree protection was the Marconi health insurance case, and the Appellate Court made a point of stating retirees were in a special class and deserved a higher level of protection while returning the case to the lower level for additional determination of the facts.

Comment by RNUG Thursday, Jan 9, 14 @ 11:03 am
DavStevens– You should check out the State Universities Annuitants Association, join and contribute to the legal fund.

http://www.suaa.org/

Comment by Liberty First Thursday, Jan 9, 14 @ 11:04 am
===I’m still (barely) under Social Security age.===

You’re one of those “Boomers” then, who are trying to bankrupt the “Millenials” I guess. I had a relative (you can pick your friends) try to scare my daughters over the holidays by telling them they each owed $60,000 to the Godless Chinese communists. I told him that they hadn’t received any invoices yet, and if they did, I said that they could just send them to me, and I’d have my friends at the Fed debase the dollar a bit to pay it off, no problem. He almost choked on a Turkey leg when I told im that, LOL.

Comment by PublicServant Thursday, Jan 9, 14 @ 11:04 am
DavStevens - Thursday, Jan 9, 14 @ 11:00 am:

Depends.

Some of the requested relief is to have the entire law completely thrown out; that would affect everyone. Plus there are more lawsuits to come; the “We Are One” coalition has previously stated they intend to file one.

Comment by RNUG Thursday, Jan 9, 14 @ 11:06 am
Thanks to RNUG for your insight and to Rich for the links to the individual lawsuits. Now that I have joined RNUG on the outside, I will have more time to dig into the details. And I suppose it is time to submit my application for membership in the RSEA to support the cause.

Comment by Finally Out (formerly Ready to Get Out) Thursday, Jan 9, 14 @ 11:14 am
Norseman,

Thanks for adding the point about the AAI not being a COLA. I should have noted that. As you know, one of the suits went into a lot of detail about that.

Comment by RNUG Thursday, Jan 9, 14 @ 11:15 am
I retired under the level income option. I’ve attempted to contact the various groups involved and talked to one of the attorneys. He wasn’t aware of my group being included in any lawsuit. I had thought it might provide another avenue.
Also..I recall in the Narduli decision he specifically defined a pension as a fixed annuity. He deliberately excluded any Cola. sees that the decision on the Health Care premium case will tell us where we stand (If it ever comes down)

Comment by Anotherretiree Thursday, Jan 9, 14 @ 11:21 am
Finally Out (formerly Ready to Get Out) - Thursday, Jan 9, 14 @ 11:14 am:

If you do join RSEA, myself and a couple of other regular commentators are somewhere in the audience.

Comment by RNUG Thursday, Jan 9, 14 @ 11:23 am
RNUG, thanks for the clarity. I would send Rich a bill for your work, remember he supports SB1 and is an unconstitutional pension thief. You are too kind.

Comment by Howard Thursday, Jan 9, 14 @ 11:24 am
Date of “Next to File” should be 2014 (not 2013).

Comment by Stu Thursday, Jan 9, 14 @ 11:32 am
Howard - Thursday, Jan 9, 14 @ 11:24 am:

He couldn’t afford to pay me what I used to get back when I was writing books for a think tank: 10% of gross sales before expenses.

/s on

Figure right now Rich is up to owing for a semi-load of Pepsi (my drink of choice).

/s off

Seriously, he’s been kind enough to lend me his soapbox a few times … so I get to have a lot more impact that a letter to the editor in the local paper … and I consider partial payment. Plus I’ve gotten to know a bit about Rich, and I’m not sure your characterization is 100% accurate.

Comment by RNUG Thursday, Jan 9, 14 @ 11:39 am
Stu,

You’re right. Guess proof reading three times wasn’t enough.

Comment by RNUG Thursday, Jan 9, 14 @ 11:40 am
Does anyone have an opinion as to why the lawsuits do not contain a count alleging a violation of the 5th amendment–taking of property without just compensation? That would certainly pave the way to a further challenge in federal court, wouldn’t it?

Comment by funny guy Thursday, Jan 9, 14 @ 12:02 pm
(1) doesn’t really matter who is in the class. If the courts hold it unconstitutional, that ruling will apply to all; (2) if you can’t win the pension diminishment argument, you ain’t going to win on the contract clause; (3) however, a properly pled contract clause claim might get you into federal court (while Illinois generally interprets its own constitution in lockstep with parallel provisions of the federal constitution, the parties need to expressly reference the federal constitution and federal caselaw to ensure federal jurisdiction);(4) the equal protection is a throw-away for the press release. All the legislature would have to do to cure that defect would be to add the judges in; and (5) haven’t seen the “supporting documentation” but the hazards of that is to transform this matter into a question of fact instead of a question of law which will significantly delay the resolution in the trial court.

Comment by Anonymous Thursday, Jan 9, 14 @ 12:15 pm
No one specifically answered Urbs in Horto’s assertion that since a federal contract clause claim was not specifically included in any of the currently filed lawsuits, that they waived “any such claim by these plaintiffs and forecloses any attempt to get into federal court”. I’d like to find out if that particular gotcha is true.

Comment by PublicServant Thursday, Jan 9, 14 @ 12:42 pm
=== No one specifically answered Urbs in Horto’s assertion that since a federal contract clause claim was not specifically included in any of the currently filed lawsuits, that they waived “any such claim by these plaintiffs and forecloses any attempt to get into federal court”. I’d like to find out if that particular gotcha is true. ===

These are actions in state courts. They can’t make rulings based on federal law.

Comment by Norseman Thursday, Jan 9, 14 @ 12:53 pm
RNUG,

I’ll be doing the same thing on my checks until at least March

Comment by Stu Thursday, Jan 9, 14 @ 12:57 pm
Norseman, so the answer is No, the pursuit of a federal violation is federal court is not precluded simply because it was not mentioned in plantiff’s state court filings. Is that correct?

Comment by PublicServant Thursday, Jan 9, 14 @ 1:00 pm
RNUG, nice work. Nothing else to add.

Comment by Arthur Andersen Thursday, Jan 9, 14 @ 1:06 pm
That is my understanding of the law.

Comment by Norseman Thursday, Jan 9, 14 @ 1:19 pm
I find it interesting that so many of the lawsuits appear to make no mention of the .5% that was deducted from salaries to fund the AAI.
And there were no income limits which SB01 ignored in their redistributionist little formula.

As far as I can tell only one lawsuit has mentioned this .5% contribution. Am I right in that or not?

There obviously will be plenty of lawsuits with all types of approaches but in the final analysis it will come down to the members of the ISC.
(Same goes to the ruling on health insurance).

And the members of the any court have their own opinions, biases, political inclinations and often vested interests. Otherwise there would not be so many closely divided rulings.

This is complicated in Illinois as the result of the judges being exempted. And, of course, the recent reports of huge sums of campaign money received by a number of the justices. While it has come from unions, business and political parties it can not be ignored that so much has come from the Democratic Party leadership under Madigan which has supported pension ‘change.’

Remember Madigan’s earlier comments about how he believed that four of the judges would rule in his favor.

So what do you think this means? Do any of you have any thoughts as to how all this will play out in a final decision? Do you have any insights on the individual judges?

In the final analysis any language in the ISC and any arguments made will still be interpreted by these judges.

Comment by Federalist Thursday, Jan 9, 14 @ 1:30 pm
Both state retiree suits mention the contribution.

Comment by Norseman Thursday, Jan 9, 14 @ 1:49 pm
Norseman,

Thanks for your prompt response.

Comment by Federalist Thursday, Jan 9, 14 @ 1:52 pm
Federalist - Thursday, Jan 9, 14 @ 1:30 pm:

I agree it will eventually come down to whatever the 7 IL SC judges say. But in order to rule PA 89-0599 constitutional, they are going to have to come up with a lot of fancy rationalization in order to ignore past precedent as interpreted by their predecessors or even their relatively recent Jorgenson comment.

Comment by RNUG Thursday, Jan 9, 14 @ 2:16 pm
Should note that the AAI contribution level depends on the system. For SERS, TRS & SURS it is 0.5%; for GARS and JRS it is 1.0%. Presumably the latter 2 systems require a higher payment because their pensions can reach a higher percentage and accrue at a quicker rate than the other 3 systems.

Comment by RNUG Thursday, Jan 9, 14 @ 4:08 pm
The Cook County suit was filed by a former justice of the appellate court and a very formidable and respected lawyer: Gino DiVito.

Comment by BobbyG Thursday, Jan 9, 14 @ 5:17 pm
You are correct. Gino DiVito is top notch.

Comment by Retired and Fed Up Thursday, Jan 9, 14 @ 6:06 pm
http://blogs.chicagotribune.com/news_columnists_ezorn/2010/04/counterpoint.html contains a lengthy memo that Gino DiVito sent to Governor Quin in April of 2010 in which DiVito analyses court cases that have dealt with the pension protection clause of the Illinois Constitution.

Comment by Joe M Thursday, Jan 9, 14 @ 6:23 pm
(New to list)
I noticed that Canada has a more supportive attitude towards retirement pensions, including
Defined Benefit pensions, from what I have seen. I wonder if, as some argue, that the broad attack in the US on retiree’s pensions is orchestrated by big money or ??
Also, will there likely be recourse to Federal
appeal if the Illinois Supreme Court affirms SB1?
(One more listserv to monitor for pension talk:
email listserv@listserv.uic.edu and message
” subscribe academy2 “)

Comment by Internaut Thursday, Jan 9, 14 @ 10:50 pm
Lots of postings (here and elsewhere) mention a union retiree vs a non-union retiree. While I understand that some folks are/were covered by a union contract, the retirement rules are the same for all. I don’t understand why the difference is mentioned. The SERS rules (a contract, one might say) apply to all; union and non.

I worked for the State for 35 years. I started as non-union, then one day my pay title was unionized, later I was not covered by the union, and again I was magically in the union. Which category am I in?

Comment by a Retiree Friday, Jan 10, 14 @ 7:09 am
As a retiree my decision to retire was based on the promises made to me before I retired. The 1% reduction in fundung does not benefit me. I pray
this issue is addressed in the lawsuits.

Comment by Retired teacher Friday, Jan 10, 14 @ 8:58 am
A Retiree - this is not a union or nonunion issue. The lawsuits address both sides.

Comment by Norseman Friday, Jan 10, 14 @ 9:22 am
a Retiree - Friday, Jan 10, 14 @ 7:09 am:

You’re retired. It shouldn’t matter.

It all boils down to the various associations (RESA, ISEA-R, etc.) not stepping on the toes of the various unions.

All that matters is you complied with the requirements for retirement as defined by the system you retired under.

Comment by RNUG Friday, Jan 10, 14 @ 12:04 pm