Chicago Mayor Rahm Emanuel persuaded the Illinois legislature to pass a law in 2014 changing city pension plans to increase employee contributions and to reduce benefits, but now the state’s Supreme Court has ruled the law unconstitutional and has thrown out the pension reform scheme.
Emanuel hoped the law would help ease the mounting pension bomb threatening to swamp not just Chicago’s budget, but the budget of nearly every municipality in the state as well as the budget of the state itself.
With Emanuel warning that the city’s pension funds would be insolvent within 15 years, the legislature passed the 2014 law reducing benefits, hiking contributions, and lowering cost of living raises, among other changes.
Naturally, as soon as the law was passed, city unions immediately took the changes to court to demand the law be set aside as unconstitutional. Last year, a Cook County court sided with the unions ruling that the pension changes could not be enacted.
Now the state’s supreme court has agreed: The reform is unconstitutional.
“These modifications to pension benefits unquestionably diminish the value of the retirement annuities the members of (the city workers and laborers 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 court’s ruling stated.
At issue is a provision in the state’s constitution maintaining that any change in the pension plans that takes away benefits is illegal. The 1970s-era constitutional provision has been a stumbling block to pension reform in the Land of Lincoln since the day it was enacted.
Mayor Emanuel has tried several tracks to easing the pension crisis including shifting city workers to Obamacare, under much criticism.
This isn’t the first time the state supreme court ruled pension reforms unconstitutional. The 1970s provision has been the basis for the court to invalidate a series of pension reforms over the last ten years. And in fact, the courts can’t be faulted. The provision makes it pretty clear that no diminishment of benefits can be made. The only way for Illinois to reverse the pension troubles it is experiencing is to call a constitutional convention and jettison the rule that prevents changes in pension plans.
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