Chicago's 2014 overhaul of its Municipal and Laborers pension funds is unconstitutional, the Illinois Supreme Court ruled Thursday.
The state's high court ruled that Chicago's pension measure, SB 1922, violated the Illinois Constitution's pension clause, which states that contractual pension benefits cannot be reduced.
"These modifications to pension benefits unquestionably diminish the value of the retirement annuities the members of (the two pension funds) were promised when they joined the pension system. 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," the ruling reads.
Under SB 1922, city of Chicago workers had to pay more into their pension funds and cost-of-living increases were reduced for retirees. The city was required to pay more into the plans. Without the pension changes, the city has said the two funds will become insolvent by 2026 and 2029.
AFSCME Council 31, the Chicago Teachers Union, the Illinois Nurses Association and Teamsters Local 700 challenged the pension measure in court. The four unions responded to the ruling in a joint statement:
Today's ruling strengthens the promise of dignity in retirement for those who serve our communities, and reinforces the Illinois Constitution, our state's highest law.
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. 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.
Like last year's decision that prevented pension cuts to teachers, state employees and university employees in state pension systems, 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.
It's long past time for elected officials to stop trying to end-run the constitution and shirk their duty. Pension funding challenges require funding solutions that must be constitutional and fair to all. Our unions are committed to working with anyone of good faith toward that goal.
While Chicago Mayor Rahm Emanuel expressed disappointment over the Supreme Court's decision, he said the "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 SB 1922 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," he said in a statement.