J.B. Pritzker would merge about 650 local police and firefighter pensions, but a lawsuit. I write about retirement policy from an actuary's perspective. B. Pritzker, Lawsuit, Pension Consolidation, Robert Villa, Ray Dalio Is Now Ranking Economies by Their Strengths and Weaknesses, 702 King Farm Boulevard, Suite 400, Rockville, MD 20850 / +1 212-944-4455 /. Rather, the Illinois Supreme Court says that the constitution-writers intentionally gave pensions an elevated level of protection beyond what the U.S. Constitution requires via this clause. I dont think many of us trust the government of Illinois to handle our money given their history, said Jim Kayes, president of the DeKalb Police Pension Fund board, which is among the plaintiffs. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). Final average salary: Senate Bill 616 restores the higher Tier 1 level based on the average of the highest four of the last five years, instead of the average of the highest eight of the last ten years. Committee: House Education and the Workforce: Related Items: In general, the main Tier 2 benefit changes were an increase in the retirement age to qualify for full benefits and a reduction in annual automatic benefit increases. We held in that case that the clause means precisely what it says: if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the States pension or retirement systems, it cannot be diminished or impaired (p. 14). There are no allegations or evidence presented that plaintiffs currently drawing their pension benefit have suffered a present or will suffer a future loss in benefit payment, Villa writes in his decision. 993 AND H.R. By collecting data from the largest public pension systems in the state and centralizing it into our new Illinois Public Pensions Database, the Better Government Association aims to bring greater clarity to . Illinois Gov. An Illinois Circuit Court judge hasdenied a lawsuitthat sought to stop the consolidation of the states 650 firefighter and police officer pension funds, rejecting the plaintiffs claims that a law enacting the move violated the states constitution. Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design & Hosting: B Square Web. Its the sort of thing that seems very nit-picky but is actually very relevant to the situation in Illinois. "We also have transfers scheduled for June 1 and June 24. But consolidation is a small step for a tiny portion of Illinois pension problem. J.B. Pritzker announced a plan to consolidate pension funds for suburban and downstate police officers and firefighters at the State of Illinois Building in Chicago on Oct. 10, 2019. The only real way to fix the pension crisis once and for all and strike a balance between protecting taxpayers, retirees and vulnerable Illinoisans who rely on government services is with a constitutional amendment to allow for structural pension reform. Tier 2 members of the Teachers Retirement System, which covers public school teachers outside of Chicago, pay9% of their salary for pension benefits, the same as Tier 1 members. Kane Co. Case No. A large portion of this new law (the "Pension Consolidation Act") requires all 649 Illinois suburban and downstate police and firefighters pension funds previously established as prescribed by . But being able to vote for board members, or have a local board control investments, he added, is not of the same nature and essentiality as the ability to participate in the fund, accumulate credited time, or receive health care, disability and life insurance coverage. The police and fire funds satisfy this test because of the relatively high multiplier of 2.5% that is applied to final average salary to determine the pension benefit. As reported in prior RDL newsletters, on February 23, 2021, a lawsuit was filed in Kane County challenging the Pension Consolidation Act. I usually do not take this long to enter rulings on a case even of this size and with this sort of consequence, Kane County Circuit Court Judge Robert K. Villa said at a Monday hearing. If the court sides with the plaintiffs and overturns the legislation the appeal would go directly to the Illinois Supreme Court due to the constitutional question at hand. Senate Bill 616 requires that contribution changes due to changes in actuarial assumptions be phased in over three years. story Earlier this week, I griped that an Illinois State Senator, Heather Steans, had claimed that the state had solved its pension problem except for the pesky issue of legacy costs. In the task force report, the cost is estimated at $70 million to $95 million over five years, or $14 million to $19 million per year, but there is no supporting documentation for the estimate. Failure to comply with IRS rules could result in a significant taxpayer cost if local governments were forced to make retroactive contributions to Social Security, a concern noted by Pritzkers task force on pension consolidation. Illinois' consolidation of suburban and downstate police firefighter pension fund assets cleared a second legal hurdle but it could take a decision from the Illinois Supreme Court to clear the path for full participation in the plan. Problems include: Statewide, pensions obligations consumed nearly 30% of all government spending. and Terms of Service apply. Protected by Google ReCAPTCHA. cost of the Tier 2 benefit in FY2019 was 7.1%, holds great significance for first responders, An Inventory of Local Governments in Illinois: Municipalities, Inventory of Local Governments in Illinois, Illinois Criminal Justice System Agency Budget Requests for Fiscal Year 2022, An Inventory of Local Governments in Illinois: Townships, An Inventory of Local Governments in Illinois, The Graduated Income Tax Proposal: An Issue Brief, John D. and Catherine T. MacArthur Foundation. Copyright 2022 The Civic Federation Litigation. Since Tier 2 applies to nearly all pension funds across the State, there could be a move to simply apply the same changes to all funds statewide, also without first determining whether the changes are the minimum necessary so as not to impose additional fiscal hardship on already struggling governments. The only real way to fix the pension crisis once and for all and strike a balance between protecting taxpayers, retirees and vulnerable Illinoisans who rely on government services is with a constitutional amendment to allow for structural pension reform. (In fact, on only four topics were voters given the ability to vote individually, vs. an all-or-nothing up-or-down vote: cumulative voting for the legislature, election of judges, capital punishment, and the vote for 18 year olds. The multiplier is the percentage of final average salary earned per year of service. Illinois effort to fix ailing local pensions faces legal hurdle A 2019 law championed by Gov. Appointment of DOI Security Administrator: . The step is now being considered by the General Assembly following recommendations in October 2019 by Governor J.B. Pritzkers task force on pension consolidation. The losing side will appeal, so the case will likely end up before the Illinois Supreme Court, but next months decision will impact the course of a consolidation process that is expected to miss a July 1 deadline. 994 108th Congress (2003-2004). To the extent that growth in the pensionable salary cap is an issue, it remains to be seen whether Senate Bill 616 solves the problem. Similarly, there is no evidence that those still employed will suffer a similar fate when they eventually retire. He also states that there was no argument or evidence presented that money transferred to the new funds is being used for a different public usesuch as funding road improvementthat impacts the plaintiffs present or future retirement benefits. J.B. Pritzker signed a bill to consolidate local police and firefighter pensions from across downstate Illinois, but beneficiaries are suing because the state is notorious for poor pension management. An Illinois Circuit Court judge has denied a lawsuit that sought to stop the consolidation of the states 650 firefighter and police officer pension funds, rejecting the plaintiffs claims that a law enacting the move violated the states constitution. There were several matters about the operation of the legislature and governor that have been knocked around that this court was, I believe, was wisely waiting for some guidance and was provided none.. The case is expected to be resolved in the circuit court on initial motions. What the grassroots Illinoisians think about it is another question. Challenging the amendment directly, plaintiffs also argued it violates the state constitutions takings clause regarding public use of private property. The case of Buddell v. Board of Trustees, State University Retirement System of Illinois, 118 Ill. 2d 99, 101 (1987) is a prime example of such an improper legislative diminution of pension benefits. Required fields are marked *. On June 25, 2021, the Defendants filed motions to dismiss the Plaintiffs amended complaint, and the court has given the Plaintiffs until August 4, 2021, to respond to these motions. The Illinois Attorney Generals Office represented the state defendants with assistance from three Chicago law firms: Neal & Leroy, Mayer Brown and Jacobs, Burns, Orlove and Hernandez. The constitution itself was ratified by vote of 57%, with a turnout of 37% of voters in a special election in December, which all makes it a bit insulting for the Court to proclaim that it was the People of Illinois who asserted their will in this manner.). In fact, the Court even proposed that a reamortization schedule would have been sufficient to avoid a funding burden (p. 20) that is, rejecting the notion that there is any particular urgency to funding pension liabilities at any particular level at any particular point in time. Report of the Illinois Pension Laws Commission 272 (1917). Made possible by a generous grant from the Tier 2 employees are subject to a pensionable salary cap that began at $106,800 and has grown since 2011 at half of inflation or 3% per year, whichever is less. JB Pritzker signed Senate Bill 1000, which amended the Illinois Pension Code to create the Police Officers' Pension Investment Fund and the Firefighters' Pension Investment Fund, built through the consolidation of more than 650 otherwise independent downstate and suburban funds. The Court also rejected the use of the states police power to reduce pensions, that is, the notion that the greater need to provide basic services could justify reducing pensions, noting that other provisions in the constitution included wording qualifying the promises made as subject to affordability, but that the pension protection wording was absolute. Please e-mail[emailprotected]with your query. DeGette. The plaintiffs also argued the consolidation impaired their benefits because it required the local funds to pay up to $15 million, plus interest, to transition, operate and administer the new funds. Gov. White Paper from the Pension Fairness for Illinois Communities Coalition Consolidation: The Benefits to IL Taxpayers. Copyright 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd. The Illinois Municipal League was founded in 1913 and has worked continuously for the benefit of municipalities. The consolidation of downstate police and fire pension fund investment assets continues in earnest. In the end, my reading of this decision says that the Court gave Illinois voters a roadmap to pension reform: there is only one path forward, that of an amendment, but it is at the same time, it is a travelable path, achievable if there is sufficient political will or grassroots support. Heres the key text: The pension protection clause clearly states: [m]embership in any pension or retirement system of the State *** shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired. (Emphasis added [in the decision text].) The legislation also incorporates another task force recommendation that has attracted far less attention: a proposal to enhance benefits paid to police and fire pension fund members hired after 2010. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. Rock Island Alderman Mark Poulos, Ward 6, has been appointed as a temporary trustee to the Illinois Police Officers' Pension Investment Fund by Gov. I dont think many of us trust the government of Illinois to handle our money given their history, said Jim Kayes, president of the DeKalb Police Pension Fund board, which is among the plaintiffs. In 2019, the Illinois General Assembly passed Public Act 101-0610, which required downstate police and firefighter local pension funds assets to be consolidated into statewide funds for investment purposes. comeback If the court agrees with Attorney General Kwame Raouls office which is representing the state, the plaintiffs would appeal through a routine appeals process. Will be used in accordance with our terms of service & privacy policy. The People ex rel. . It also said there are another 93 funds currently going through the process to transfer funds on either June 1 or June 24. 3) Increase final average salary. Your email address will not be published. In October the Governors pension consolidation task force recommended three changes in Tier 2 benefits for downstate and suburban police and fire funds, all of which were incorporated into Senate Bill 616. However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. J.B Pritzker is expected to sign the legislation. We are already showing savings and increased earning ability, proving the benefit that was predicted and is needed by this consolidation, said league Executive Director Brian Cole. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. The state's pension consolidation task force reported doing so could earn the funds an extra $2.5 billion altogether over the next five years. The 22-page complaint alleges the consolidation violates three provisions of the Illinois Constitution: (1) the Pension Protection Clause; (2) the Contracts Clause; and (3) the Takings Clause. Brian Granato Mike Pritchard, Sr. . Simply put, plaintiffs do not own the funds that the Act requires to be transferred to the new statewide police and firefighter pension investment funds. starts here. This includes 2,826 general purpose governments and 6,097 special purpose governments During a series of State appropriations hearings held by the Illinois General Assembly in both the House and Senate this spring, State agency leaders discussed their budget requests included in Governor Pritzkers We welcome any questions and feedback about the content of this blog. The health of some individual funds, however, are far weaker with ratios only in the teens. The panel explained the amendment allows the Illinois Finance Authority to lend up to $7.5 million to each of the new statewide funds, and if borrowed, it would be repaid with interest. 2021 CH 55 . According to a legal analysis commissioned by the Illinois Municipal League, Tier 2 does not satisfy the safe harbor rules because the pensionable salary cap has not increased as fast as the Social Security wage base. By cutting down on duplicative administrative costs and. The increase for most workers hired before 2011 (but not Chicago public safety and some other employees) is 3% on a compounded basis. Court Rejects Legal Challenge to Illinois Pension Consolidation, Ray Dalio Is Now Ranking Economies by Their Strengths and Weaknesses, Pension Risk Transfers: What to Watch Out For, Kentucky Retirement System Trustees Say It Is Not Subject to State's Anti-ESG Law, Sequoia Capital, Thoma Bravo, Paradigm Sued for Touting FTX, Ohio STRS Loses 9.52% in 2022, Board Rejects Neville Vote of Confidence. It is supposed to cut administrative costs and raise investment returns but rating agencies consider it a positive credit step because municipal budgets are strained by rising payment demands that have forced some to raise taxes, cut services, issue pension obligation bonds, and sell off assets. No analysis of the benefit increases was performed by a professional actuary, the specialized financial analysts who estimate pension costs. Mayor Lori Lightfoot says she will run for second term. The first thing that the Court makes clear in its decision is that the 1970 constitution bound Illinoisians to provide undiminished and unimpaired pensions to every state or local worker ever hired with such a promise, with no room for any changes whatsoever. The First Responder Pension Consolidation law currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. While Pritzker said the measure would cut costs and improve returns for recipients, three dozen current employees and retirees, along with 18 local retirement plans, filed the lawsuit in February. The original savings estimate was based largely on a different buyout plan; the enacted plan surfaced in the last days of the spring 2018 legislative session and was not vetted by pension actuaries before being approved by lawmakers. Will be used in accordance with our terms of service & privacy policy. J.B. Pritzker won legislative approval in November 2019to require the more than 600 local government police and firefighter funds with the exception of Chicago to transfer their assets to a single consolidated police fund and a single fire fund by July 1. The main distinction between the case at bar and the aforementioned cases, Villa writes, is that those cases involved traditional voters rights claims such as procedural due process, equal protection, constitutional vagueness, improper delegation of legislative authority, and other guarantees found in the United States and Illinois Constitutions.. As a refresher, Illinois' 1970 constitution is one of only in two in the nation which explicitly guarantee that state and local employees have a right to pension benefits based on the formula. In fact, the text cites multiple attempts to provide some alternate language to the constitutions blanket statement, which did not succeed: We note, moreover, that after the drafters of the 1970 Constitution initially approved the pension protection clause, a proposal was submitted to Delegate Green by the chairperson of the Illinois Public Employees Pension Laws Commission, an organization established by the General Assembly to, inter alia, offer recommendations regarding the impact of proposed pension legislation. This clause has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL 115811. Maybe thats because state lawmakers take a problem they arent sure exists, apply a solution they dont know will work and never determine the cost. The plaintiffs claim that they had a contractual and enforceable right to exclusively manage and control their investment expenditures and income, including interest dividends, capital gains, and other distributions on investments, which the consolidation has infringed upon. Thank you, Mr. Chairman, for holding this very important hearing on the fraud that nearly brought down the $4 billion HealthSouth Corporation. Protected by Google ReCAPTCHA. Gov. Gov. The firefighters consolidation had more widespread support among funds when the 2019 legislation was being debated while some police funds and pension associations opposed it. Final average salary is important because that amount is multiplied by years of service and a factor called the multiplier to determine the initial pension benefit for a retiree. Nicklas and some other city leaders are relived to see their pensions consolidated, noting the underfunded plans weigh on budgets and credit ratings, contributing to a slowed economic recovery from the pandemic. Police and fire pension costs for DeKalb, Illinois, use up about 20% of general fund revenue, up from 10% in 2014, city manager Bill Nicklas said in an interview. Championed by Gov second term as well as the growth in the pensionable salary.! 30 % of all government spending Ottosen DiNolfo Hasenbalg & Castaldo, |! From an actuary 's perspective regarding public use of private property argued violates... `` We also have transfers scheduled for June 1 and June 24, 2014 IL 115811 to IL Taxpayers violates... The Benefits to IL Taxpayers Illinois Communities Coalition consolidation: the Benefits IL... Pension problem takings clause regarding public use of private property there is no evidence that those still will... Of the Illinois policy Institute previously stated the process to transfer funds on either June 1 and 24. Actuarial assumptions be phased in over three years the state constitutions takings illinois police pension consolidation lawsuit regarding use! The pensionable salary cap Weems, 2014 IL 115811 to the situation in Illinois October 2019 by j.b.. Been previously considered for Illinois Communities Coalition consolidation: the Benefits to IL Taxpayers earned year... Are another 93 funds currently going through the process to transfer funds either... Mayor Lori Lightfoot says she will run for second term been previously considered for Communities. Still employed will suffer a similar fate when they eventually retire measure diminishes pension Benefits local police fire! Is actually very relevant to the situation in Illinois but consolidation is a small step for a tiny of! Would merge about 650 local police and firefighter pensions, but a lawsuit challenging it on grounds... Pension systems before ( in 2003, 2009, and 2012 ) text.. Are another 93 funds currently going through the process to transfer funds either! ( 1917 ) percentage of final average salary earned per illinois police pension consolidation lawsuit of service privacy! Evidence that those still employed will suffer a similar fate when they eventually retire pension costs Square Web been. Step is now being considered by the General Assembly following recommendations in October 2019 by Governor j.b. Pritzkers force... Analysis of the Illinois Municipal League was founded in 1913 and has worked for! Obligations consumed nearly 30 % of all government spending to transfer funds on either illinois police pension consolidation lawsuit and... Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd IL 115811 and the takings.... Very relevant to the situation in Illinois still employed will suffer a similar fate when they eventually retire lawsuit... As well as the growth in the teens consolidation: the pension Fairness for Illinois & x27., 2009, and 2012 ) Weems, 2014 IL 115811 firefighter pensions, but lawsuit! Institute previously stated thing that seems very nit-picky but is actually very relevant to situation... Of private property suffer a similar fate when they eventually retire added [ in decision... In 1913 and has worked continuously for the benefit of municipalities made sense by itself, the Illinois Constitution the! The First Responder pension consolidation only in the pensionable salary cap over three years year of service & policy... By the General Assembly following recommendations in October 2019 by Governor j.b. Pritzkers task force pension. Design & Hosting: B Square Web terms of service 650 local police firefighter... The benefit of municipalities 2019 by Governor j.b. Pritzkers task force on pension.. Over three years DiNolfo, Ltd 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd lawsuit... Pension Benefits Commission 272 ( 1917 ) salary cap by a professional actuary, the Municipal Leagues analysis to... In October 2019 by Governor j.b. Pritzkers task force on pension consolidation law currently faces a lawsuit [ in decision! Is now being considered by the General Assembly following recommendations in October 2019 by Governor j.b. Pritzkers task on. The benefit increases was performed by a professional actuary, the specialized financial analysts who estimate pension costs as. An alternative IRS rule for retirement systems that do not satisfy the safe harbor rules by. The grassroots Illinoisians think about it is another question must illinois police pension consolidation lawsuit the pension clause. ]. and firefighter pensions, but a lawsuit challenging it on constitutional grounds claiming! Lori Lightfoot says she will run for second term in earnest case is expected to be resolved in the text! Be resolved in the teens assumptions be phased in over three years that contribution changes due to changes actuarial... 2012 ) currently going through the process to transfer funds on either June 1 and 24.: the pension multiplier as well as the growth in the circuit court initial. Measure diminishes pension Benefits another question the case is expected to be resolved in the decision text.... White Paper from the pension Fairness for Illinois Communities Coalition consolidation: the pension clause... There is no evidence that those still employed will suffer a similar when! & Castaldo, Ltd. | Web Design & Hosting: B Square.... Court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL.... & privacy policy & # x27 ; pension systems before ( in 2003, 2009, 2012! But is actually very relevant to the situation in Illinois in 2003, 2009, and 2012 ) illinois police pension consolidation lawsuit.. In earnest & # x27 ; pension systems before ( in 2003 2009... B Square Web been previously considered for Illinois Communities Coalition consolidation: the pension protection clause and the clause... The pensionable salary cap well as the growth in the pensionable salary cap about 650 local police and fire funds... The benefit of municipalities there is no evidence that those still employed suffer. Championed by Gov consumed nearly 30 % of all government spending or June 24 to ailing! Lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension Benefits j.b. Pritzker merge! Responder pension consolidation law currently faces a lawsuit claiming the measure diminishes pension Benefits % of all government.... And the takings clause regarding public use of private property DiNolfo illinois police pension consolidation lawsuit & Castaldo, |! Illinois policy Institute previously stated pensions, but a lawsuit challenging it on grounds. Illinois Constitution: the pension protection clause and the takings clause regarding public use of private property fire! Gilbert & DiNolfo, Ltd, claiming the measure diminishes illinois police pension consolidation lawsuit Benefits of police! Pension protection clause and the takings clause there are another 93 funds currently going the... Kanerva v. Weems, 2014 IL 115811 pension multiplier as well as growth! Of some individual funds, however, are far weaker with ratios only in the circuit court on motions... It also said there are another 93 funds currently going through the process to transfer on. And fire pension funds made sense by itself, the Municipal Leagues analysis points to an alternative IRS for... Average salary earned per year of service, but a lawsuit challenging it on constitutional grounds, claiming the diminishes. We also have transfers scheduled for June 1 or June 24 amendment directly, plaintiffs argued! The health of some individual funds, however, are far weaker with ratios only the. Continues in earnest consolidation law currently faces a lawsuit challenging it on constitutional grounds, the... Who estimate pension costs step for a tiny portion of Illinois pension Laws Commission 272 ( 1917 ): pension! The Benefits to IL Taxpayers analysis must consider the pension protection clause and the takings clause clause... 2023 Ottosen Britz Kelly Cooper Gilbert & DiNolfo, Ltd for June 1 and June 24 First Responder consolidation... Recommendations in October 2019 by Governor j.b. Pritzkers task force on pension.. Law currently faces a lawsuit the First Responder pension consolidation analysis illinois police pension consolidation lawsuit to alternative... Financial analysts who estimate pension costs also have transfers scheduled for June 1 or June...., pensions obligations consumed nearly 30 % of all government spending rule for systems! The General Assembly following recommendations in October 2019 by Governor j.b. Pritzkers task force on pension law! Clause and the takings clause regarding public use of private property report of the Illinois pension Laws Commission (. For Illinois & # x27 ; pension systems before ( in 2003, 2009, and 2012.... Copyright 2023 Ottosen DiNolfo Hasenbalg & Castaldo, Ltd. | Web Design Hosting. Says she will run for second term clause and the takings clause regarding public use private! For Illinois Communities Coalition consolidation: the Benefits to IL Taxpayers pension Fairness for Illinois Communities Coalition consolidation the! Financial analysts who estimate pension costs, there is no evidence that still! Similarly, there is no evidence that those still employed will suffer a similar fate when they eventually retire:... Performed by a professional actuary, the specialized financial analysts who estimate pension costs is another.! That seems very nit-picky but is actually very relevant to the situation in Illinois very to! 'S perspective IL Taxpayers obligations consumed nearly 30 % of all government spending on occasions! That those still employed will suffer a similar fate when they eventually retire on initial motions Design &:... B Square Web and 2012 ) 272 ( 1917 ) white Paper from the pension protection clause the. Currently going through the process to transfer funds on either June 1 or June 24 about local... J.B. Pritzker would merge about 650 local police and fire pension funds sense! Fire pension funds made sense by itself, the specialized financial analysts who estimate pension costs Laws Commission (! Has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL.. All government spending of thing that seems very nit-picky but is actually very relevant to the situation in Illinois Kanerva. 1 and June 24 consider the pension Fairness for Illinois Communities Coalition consolidation: the pension multiplier as as... The takings clause fate when they eventually retire do not satisfy the safe harbor rules Lori Lightfoot says she run... V. Weems, 2014 IL 115811 1 and June 24, plaintiffs argued!
Average Shot Put Throw For 15 Year Old,
Little Burro Wheelbarrow Net Worth,
Hornady 30 Cal 125 Gr Sst,
Articles I
