Victory in City Pension Reform Litigation!

March 31, 2016 04:54 PM

Illinois Supreme Court rules that “Reform” Legislation slashing and deferring statutory increases is Unconstitutional!     

We’re proud to say:  You Can Fight City Hall!

While active employees have the unions to protect them,and the City has been able to get legislation passed or blocked in Springfield to accommodate its decades-long desires to ignore pension underfunding,retirees only have the Constitution and the Courts—and some committed lawyers too!

We are proud to have successfully challenged the City’s legislation to slash and defer the statutory increases earned by Municipal and Laborers Funds participants.  Most notable in the court’s decision:

1.     Utter rejection of the City’s “Net Benefit” theory: Rejecting the City’s assertion that Pension Code Section 22-403 limits the pension obligations  to the Funds, not the City.  (The city’s “net benefit” argument was that the City was not responsible if the Funds become insolvent, so anything the City adds to the Funds’ solvency is a “net benefit” enforceable even if it reduces the amount of your annuity.)  This is very important, because it ensures that your pension will be paid, and in the amounts you have earned, over the City’s threats to just walk away from your pensions.

From Paragraph 47:

To allow such a construct to justify diminishing benefits would be merely an end run around the reserved sovereign powers argument, as explained in Heaton. The City’s theory would allow the legislature “through its funding decisions, [to] create the very emergency conditions used to justify its suspension of the rights conferred and protected by the constitution.” Heaton, 2015 IL 118585, ¶ 85. This is the very circumstance that the pension protection clause was intended to foreclose. To be clear, the constitution removed the option of unilaterally diminishing benefits as a means of attaining pension stability. Whether members of the Funds may be “better off” under the new terms of the Act despite the unconstitutional diminishment of their benefits, as defendants contend, is not for the General Assembly to decide unilaterally. The fundamental point here is that determination must be made, if at all, according to contract principles by mutual assent of the members, and not by legislative dictates.

2.     Rejection as well, of the City’s “Bargained For” Consideration argument (i.e., that the reform statute constitutes a “bargained for” contract approved by most of the City’s unions.  Considering that the City has always rejected the unions’ authority to negotiate for retirees, its argument that its deal with many of the unions should be treated as a binding contract, despite the facts that (i) it would not be a negotiable collective bargaining issue, and of course, (ii) was not subjected to the procedural requirements of such a transaction (like a vote of members!).  In this regard, the Court’s recognition that retirees’ Pension Clause rights are their individual rights cannot be overstated.

     ¶55.  In this case, it is undisputed that the unions were not acting as authorized agents within a collective bargaining process. Thus, we need not resolve whether the vote taken by union representatives as expressed in the Brandon affidavit bound members of the Funds in a collective bargaining process. Rather, we agree with the trial court that “these negotiations were no different than legislative advocacy on behalf of any interest group supporting collective interests to a lawmaking body.”  The individual members of the Funds have done nothing that could be said to have unequivocally assented to the new terms or to have “bargained away” their constitutional rights. Accordingly, nothing in the legislative process that led to the enactment of the Act constituted a waiver of the Funds members’ constitutional rights under the pension protection clause.





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