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Court to hear Chicago pension case

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Illinois

By Barton Lorimor Email | @bartonlorimor

he Illinois Supreme Court will hear oral arguments in November on Chicago’s year-old pension law.

Orders entered Thursday set an expedited schedule with briefs due over the next three months.

The overhaul approved by Illinois lawmakers sought to eliminate more than $9 billion in unfunded pension liability by cutting benefits and increasing contributions. It would affect about 61,000 city employees and retirees.

Background…

Last month, Cook County Circuit Court Judge Rita Novak overturned a 2014 state law that reduced cost-of-living benefit increases for retired city workers and laborers and increased contributions by current employees. Those changes were coupled with increases in taxpayer payments to the pension funds.

Novak based her decision on a unanimous state Supreme Court ruling in May on a similar pension case. The court struck down a law changing state pensions, saying the Illinois Constitution’s protection against “diminished or impaired” pension benefits for public workers and current retirees was absolute. Novak concluded that ruling provided “crystal-clear direction” in the city pension case.

posted by Rich Miller
Friday, Aug 14, 15 @ 7:28 am

Comments

you have better odds winning the power ball lottery jackpot four times in a row than the ISC ruling in favor of city.

Comment by foster brooks Friday, Aug 14, 15 @ 7:33 am
While Illinois’ constitution is clear on diminishing benefits, I don’t see how requiring higher contributions is unconstitutional. Of course the union will oppose but it would be part of the contract.

Half a loaf is better than nothing.

Comment by Sir Reel Friday, Aug 14, 15 @ 7:54 am
==While Illinois’ constitution is clear on diminishing benefits, I don’t see how requiring higher contributions is unconstitutional.==

Sir Reel, if you can’t see that forcing one to pay more for something doesn’t diminish the total value of the benefit - at least you can understand about breech of contract, can’t you?

Comment by Joe M Friday, Aug 14, 15 @ 8:12 am
Did SCOTUS ever hear the Lizzie Borden defense? — “I have killed my parents, now I am an orphan, you must have pity on me.”

My guess is they will make it the rule of the land that this is not an acceptable defense to avoid the consequences of financial mismanagement.

Comment by cdog Friday, Aug 14, 15 @ 8:45 am
Chicago has a losing case but I understand they had to appeal so they can end up with political cover and be able to blame the IL SC for the coming tax increase(s).

Comment by RNUG Friday, Aug 14, 15 @ 9:02 am
== I don’t see how requiring higher contributions is unconstitutional. ==

Just look at it as pure contract law. The teachers were promised if they contributed X they would eventually receive Y. Asking them to pay X+ is in violation of the agreement.

It would be like you signing an annuity agreement (without the usual disclaimers or weasel words) with an insurance company that if you contributed $100 a month starting at age 25, they would pay you $500 a month for life starting at age 65. Then at your age 50 the insurance company says “we messed up and didn’t invest your money so now you have to pay $250 a month. You would be suing them for breech of contract and fiscal mismanagement.

Comment by RNUG Friday, Aug 14, 15 @ 9:11 am
Does anyone know what would happen if the Chicago Municipal/Laborers’ Funds went bankrupt?

Comment by Name/Nickname/Anon Friday, Aug 14, 15 @ 9:11 am
The fact that the Illinois Supreme Court wishes to hear this case means to me that something will be modified or clarified by this case. As I see it, the reduced cost-of-living benefit increases for retired city workers part of the lower court decision will be upheld.

I would guess that the modification or clarification will relate to the lower court decision about changes in contributions by current employees. If I was the mayor of Chicago or a Chicago tax payer I would be ready for a negative decision from the high court.

Comment by Hit or Miss Friday, Aug 14, 15 @ 9:13 am
Also as far as contract law, what happens when you have a contract Employees pay X, Employer pays Y, and it is not enough to Fund the statutory benefit? Do you really have a valid contract?

Comment by Name/Nickname/Anon Friday, Aug 14, 15 @ 9:13 am
- cdog -

While your point is valid, I should point out the appeal is to the Illinois Supreme Court. And yes, the IL SC clearly understands that government entities have created their pension fund problems. Go read the SB-1 decision; the court went out of it’s way to make the point that deliberate fiscal mismanagement is not a valid reason to invoke “police powers”.

Comment by RNUG Friday, Aug 14, 15 @ 9:14 am
Hit or Miss, the ISC is more likely to reiterate what they said in the State case: you can’t change the conditions of the retirement system after the fact once an employee is part of the system.

Comment by Pelonski Friday, Aug 14, 15 @ 9:16 am
Name/…

Yes, the contract says they will pay pension benefits once established. It doesn’t say if funded.

Comment by Pelonski Friday, Aug 14, 15 @ 9:19 am
== Also as far as contract law, what happens when you have a contract Employees pay X, Employer pays Y, and it is not enough to Fund the statutory benefit? Do you really have a valid contract? ==

Two answers:

a) IMRF is fine because those government entities were forced to make the employer payments

b) while you can model it and assume the results are valid, you will never be able to absolutely prove it one way or the other … because the employer did not make their portion of the payments.

Comment by RNUG Friday, Aug 14, 15 @ 9:19 am
The Supreme Court is already knows what it’s going to do. The Little Birdie Reporting Service got a copy of the Court’s draft ruling for the case. It say’s:

“What part of NO do you politicians not understand!!!”

Comment by Norseman Friday, Aug 14, 15 @ 9:21 am
== Does anyone know what would happen if the Chicago Municipal/Laborers’ Funds went bankrupt? ==

Let’s change that statement from bankrupt to insolvent, since government entities can’t currently go bankrupt.

I’m going to assume the IL SC will be consistent with past decisions all the way back to IFT v Lindberg (1975) where they said the pensions had to be paid when due, period, end of discussion. Presumably, if the pension funds were insolvent, the pensions would have to be paid out of current revenues of that government entity.

Comment by RNUG Friday, Aug 14, 15 @ 9:25 am
You are likely right RNUG, but it is possible that no retirees will get paid while the courts decide. And I still can’t decide who should share more liability Chicago or State that set the benefits and funding.

Comment by Name/Nickname/Anon Friday, Aug 14, 15 @ 9:32 am
=Half a loaf is better than nothing.=

I am sure you wouldn’t say that if it was your “half a loaf”.

@RNUG - Your comment on pure contract law is spot on and one of the best, consise, analogies I have heard. Hope you don’t mind but I will be “borrowing” that in the future. Credit due, of course.

Comment by JS Mill Friday, Aug 14, 15 @ 9:32 am
When the Big Banks mismanaged, they got bailouts–free money to stay in business. When public employees get ripped off by lawmakers, the remedy is to make those employees lose even more. No.

Comment by AnonymousOne Friday, Aug 14, 15 @ 9:37 am
Given the SB1 ruling, it’s curious that the Supremes took the this appeal.

Is there something in Judge Novak’s ruling they didn’t like? I expected them to just let it stand without comment.

Comment by Wordslinger Friday, Aug 14, 15 @ 9:40 am
=== You are likely right RNUG, but it is possible that no retirees will get paid while the courts decide. ===

Yes, RNUG is very good because he’s taken the time to study the issue.

As to retirees not get paid during any court action, do you think folks will let it get that close? Not a chance.

Comment by Norseman Friday, Aug 14, 15 @ 9:52 am
Thank you RNUG. I was less than diligent reading the post and was thinking it was the SB1 was being appealed to SCOTUS.

Is there still a chance the IL AG will appeal the SB1 decision to SCOTUS?

Comment by cdog Friday, Aug 14, 15 @ 10:08 am
== Is there still a chance the IL AG will appeal the SB1 decision to SCOTUS? ==

There is always a chance until there isn’t, but like others, I don’t see what issue could be validly brought up … plus SCOTUS has pretty consistently taken a “hands off” approach to state government dealing with state employees.

Comment by RNUG Friday, Aug 14, 15 @ 10:13 am
== Hope you don’t mind but I will be “borrowing” that in the future. ==

- JS Mill - Thank you and feel free to “borrow” it.

Comment by RNUG Friday, Aug 14, 15 @ 10:19 am
“The fact that the Illinois Supreme Court wishes to hear this case.” Under the rules of the Illinois Supreme Court, when a statute is held unconstitutional by the trial court, there is an appeal as a matter of right to the Supreme Court. So the Court exercises no discretion in taking the case and therefore there is no valid conclusion to be drawn that the Supreme Court is intending to overturn the trial court by docketing the case.

Comment by Anonymous Friday, Aug 14, 15 @ 12:16 pm
Anonymous - Friday, Aug 14, 15 @ 12:16 pm, thank you for the reminder to us about this rule.

Comment by Norseman Friday, Aug 14, 15 @ 12:19 pm
The lower Appellate Courts have relied on Illinois Supreme Court precedents to hold that the court may order payment out of the general fund if the legislature tries to skip out of a constitutionally required payment by failing to appropriate enough money. County Treasurers v. Hamer. http://www.illinoiscourts.gov/opinions/AppellateCourt/2014/4thDistrict/4130286.pdf. I would expect that the Illinois Supreme Court will apply the same rationale to the City’s argument about the fund running dry.

Comment by Anonymous Friday, Aug 14, 15 @ 12:26 pm
++“What part of NO do you politicians not understand!!!” ++ They passed a law banding the word “No”. (snark)

Comment by Mama Friday, Aug 14, 15 @ 2:52 pm
Why not just approve a cook county casino and by Statute require the state portion of the take to go to bailing out the pension; with some language which mandates that cook has to minimally kick in X amount every year or X percentage of its income, whichever is greater.

Instead of trying to get out of paying our bills why don’t we talk about how to get them paid….

Comment by Ghost Friday, Aug 14, 15 @ 3:12 pm
I like the expedited schedule. Perhaps City employees will get a Xmas present this year. Expediting proceedings sends the message to the politicians that they won’t gain much delay time by enacting laws which are obviously unconstitutional. Also, checked the Illinois Supreme Court website and they have NOT added this appeal to the “Special Matters” file. That might further support the notion that the Court is only hearing this because they have to.

Comment by Anonymous Friday, Aug 14, 15 @ 3:16 pm
“what happens when you have a contract Employees pay X, Employer pays Y, and it is not enough to Fund the statutory benefit?”

It depends on how the Statute is written in terms of what the employer contributions are to be.

State Farm has a defined benefit system like the States/Chicago/teachers.

They fully funded the employer contribution for employees every year.

Between contributions and investment results it is basically overfunded. Defined benefit systems outperform 401(k)s. So the State needs to put back the employer contributions and the system will be fine. Heck with the tier 2 stuff they already passed the system will end up being over funded as well.

its just time to pass laws mandating the employer contributions; and come up with a repayment plan for all the prior missed payments.

Comment by Ghost Friday, Aug 14, 15 @ 4:24 pm