Gov. t 312.346.5700 f 312.896.2500, Springfield Office | Illinois Policy This site is protected by reCAPTCHA and the Google Privacy Policy The league stated it is confident it will beat the legal challenge. Even without class status, all funds would be impacted if the court overturns the legislation. 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. The local funds are already required to pay the costs of administration of the local funds, and plaintiffs do not cite any evidence to show that the costs of administration of the new funds, even including startup costs, would be any greater, McLaren wrote. comeback The General Assembly created Tier 2 in 2010 to reduce the State's overwhelming pension obligations by significantly lowering benefits for new workers. But the panel said the complaint contained no argument as to how that requirement would specifically diminish their eventual benefits. On December 18, 2019, Illinois Governor JB Pritzker signed into law Public Act 101-0610, which provided for the mandatory consolidation of the investment assets of the State's public safety pension funds into two consolidated investment funds - one for police pension funds (Article 3 Funds) and one for firefighter pension funds (Article 4 Funds), Once the trial court issues its ruling, the case will likely be appealed by the losing party. Kane County Circuit Court Judge Robert Villa granted summary judgement to the state, prompting an appeal to the Illinois Second District Appellate Court. Please e-mail[emailprotected]with your query. The move is intended to help improve the financial stability of the pension funds and ease pressure on local governments to raise taxes to fund those pensions. The plaintiffs dropped their motion to certify class status. 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. 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. In recent years, the State has frequently rushed to enact pension changes without actuarial evaluation and public disclosure of their financial impact. However, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe harbor rules. While consolidation cuts down on duplicative administrative costs and pools investment assets for larger returns, downstate police and fire pension debt is only about5%of total state obligations. Sklodowski vs. In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and firefighter pensions in order to pool their funds into two statewide funds for investment purposesone for police and one for firefighters. 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. Therefore, legislation that diminishes these benefits will usually be struck down. If the court agrees with Attorney General Kwame Raouls office which is representing the state, the plaintiffs would appeal through a routine appeals process. 2021 CH 55 . JB Pritzker's task force released its report proposing consolidation of the states' police and fire pension funds, which at present are managed individually by the . This plan falls far short of eliminating even the $11 billion of debt held by these plans. Illinois is home to the nation's worst pension crisis, leaving taxpayers on the hook for $317 billion in unfunded pension liabilities for the five statewide retirement systems. The Firefighters Pension Investment Fund applauded the court ruling, saying in a statement that it will continue to implement the transition process, which is required to be completed by June 30. Brian Granato Mike Pritchard, Sr. . However, many of the local pension leaders remain hesitant or are even refusing to merge until they learn the outcome of litigation to block Pritzkers law. The law is aimed at easing shortfalls in Illinois local public safety pensions by merging more than $16 billion in assets from the 650 retirement plans into two funds, one for police and one for firefighters. 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. 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 effect at hire, without reduction, until retirement. With the changes in the bill just enacted, the cap would grow at full inflation instead. A state appeals panel has affirmed a ruling that the Illinois state constitution holds no barrier to a law consolidating hundreds of local police and firefighter pension boards into two statewide funds. Funding public-employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers. The increase for most workers hired before 2011 (but not Chicago public safety and some other employees) is 3% on a compounded basis. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. However, as pointed out by the Civic Federation, lawmakers never definitively established that a safe harbor violation existed for Tier 2 public safety workers, nor that the changes in this bill were the minimum necessary to bring the plans into compliance. The unfunded liabilities of Illinois suburban and downstate public safety pensionsrose to $13 billion in the last yearof compiled results reported to the state, soaring over a 29-year climb that underscores the deep strains on local government budgets. 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. No Reproduction Without Prior Authorizations. Ultimately, the combination of unknown costs for the benefit increases and uncertain savings from consolidation means taxpayers should be wary of any potential benefits of this bill. Governor JB Pritzker, too, has claimed that theres nothing to be done except to find more money, and Chicago Mayor Lori Lightfoots vaguely worded statements about the matter dont amount to anything more, either. 992, H.R. Consolidation of downstate police and fire pension funds made sense by itself, the Illinois Policy Institute previously stated. The IRS has issued rules, known as safe harbors, for determining if plans meet the minimum benefit standard. 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.). Further updates will be provided as they become available. 3, Motorist sues over crash with vehicle stolen from East St. Louis store, Wrongful death suit alleges resident at Alton nursing home received negligent care, Insurer seeks to deny coverage of suit alleging crash evidence was destroyed, Don't assume more funding makes schools better, Illinois torched business and common sense with its biometric privacy law, Illinois forward 2024: A sustainable state budget plan, Illinois tries to 'cancel' DeSantis as Pritzker, Chicago mayoral contenders play the de-platforming game. The fund said it has $6.9 billion in assets under 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. Illinois Federation of Teachers, AFT, AFL-CIO vs. Lindberg, 60 Ill.2d 266 (1975) 3 Felt vs. Board of Trustees, 107 Ill.2d 158 (1985) 5 Schroeder vs. Morton Grove Police Pension Board, 219 Ill. App.3d 697 (1991) 7 McNamee vs. State of Illinois, 173 Ill.2d 433 (1996) 9 The People ex rel. The courts decision rests on its interpretation of what constitutes a benefit., The case Arlington Heights Police Pension Fund et al v. Jay Robert Pritzker et al argues that benefits are damaged because the law strips plaintiffs of their autonomy and their authority.. To qualify for exemption from Social Security coverage, government workers must receive a retirement benefit from their public pension plan that is at least equal to the benefit they would receive under Social Security. The two sides last year laid out arguments seeking a summary judgment. The firefighters fund is further along in the consolidation process and expects to meet the deadline. In DeKalb, police and fire pension costs use up about20%of general fund revenue, up from 10% in 2014, said city manager Bill Nicklas. 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. Illinois Gov. These pensions are primarily funded through the statessecond-highestin the nation property taxes, diverting taxpayer dollars from improving cities core services. A separate law passed in December 2010 extended Tier 2 to public safety funds. Nearly $10 billion of assets are managed by local police funds that eventually would be transferred if the consolidation is upheld. A Tier 2 public safety employees final average salary, which serves as the basis for calculating monthly and annual pension payments at the end of a career, will now be based on the highest four out of the last five years rather than the highest eight of the last 10. Some pension experts warned as early as 2010 that the new benefit structure was so low that it might force certain government employees to participate in the Social Security system. The Illinois Police Officers' Pension Investment Fund told lawmakers during a committee hearing that some individual funds have resisted moving their assets because of pending litigation. January 21, 2020. Although some union leaders supported the move, dozens of police and firefighter pension boards and individual members sued the state and the new funds to stop the consolidation. The multiplier is the percentage of final average salary earned per year of service. 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. If successful, the lawsuits outcome would apply to every downstate police and firefighter pension fund in Illinois. The panel rejected the argument the local funds have an established property right in assets or funding levels. Elected officials never sought formal guidance from the Internal Revenue Service. Patrick Andriesen, Illinois Policy Institute, Woman sues Granite City QuickTrip over parking lot slip, fall, Madison County civil docket Feb. 27-Mar. H.R. What the grassroots Illinoisians think about it is another question. By: Matthew J. Schueler. 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. (Shutterstock) HINSDALE, IL In the last budget year, Hinsdale spent $163,000 on managing. DeGette. Illinois' Fraternal Order of Police is among the groups opposed to the idea. 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 Newsletter Bringing the Legal System to Light. 1970, art. Gov. Our goals are to ensure Pension Fund integrity and to educate participants about retirement and disability benefits. 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. Gov. However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. Ill. Const. Consolidation has even been previously considered for Illinois' pension systems before (in 2003, 2009, and 2012). In other words, lawmakers responded to a problem they had not confirmed existed with changes they had not confirmed would fix the problem, without knowing how much the changes would cost. The legislation proposes that the salary cap grow by 3% or the inflation rate, whichever is less. . These estimates came from comparisons to existing Illinois pension plans that are more consolidated, but these other plans also have different benefit formulas. In 2013, Illinois passed legislation which aimed to reduce pension liabilities, but various groups representing the affected employees filed suit, and the Supreme Court overturned the legislation in a 2015 decision. The practical effect is that many employees will see a boost in their initial pension check on retirement, which serves as the basis for subsequent annual increases. 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. Senate Bill 616 would consolidate the assets of Illinois 649 public safety funds, not including those in Chicago, into two new funds, one for police and one for fire. A court ruling as soon as December will determine the fate of a 2019 law Gov. A History of Pension Enactments. More than $13. 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. Although the panel agreed the protection clause covers more than just the payment of pension money, it said past Illinois Supreme Court rulings invoking the clause involved benefits that directly impacted the participants eventual pension benefit, McLaren wrote. InCarbondale, 290% of the citys property tax collections go to pensions. of the board members. 10 N. Dearborn St., Suite 800, Chicago, Illinois 60602 Appointment of DOI Security Administrator: . We hope you find our website helpful! Yesterday, Illinois Gov. The General Assembly created Tier 2 in 2010 to reduce the States overwhelming pension obligations by significantly lowering benefits for new workers. comeback . It also represented one of the rare actions taken by the state to help local governments on the pension front. B. Pritzker, who signed the bill into law. 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. For Tier 1 public safety workers hired before 2011, surviving spouses were already eligible to receive a portion of the deceaseds pension regardless of how many years of service an employee had. If the legislation is upheld, the police funds are expected to move forward with the transfer process during the appeal. An Illinois Circuit Court judge has denied a lawsuit that sought to stop the consolidation of the state's 650 firefighter and police officer pension funds, rejecting the plaintiff's claims that a law enacting the move violated the state's constitution. To date, 32 plans have transferred assets totaling more than $660 million to the IPOPIF with an additional 16funds scheduled to transfer funds May 2 which would bring the total to more than $1 billion. Handing out increased pension benefits without accounting for or offsetting the long-term cost is largely how Illinois got into its pension crisis to begin with. https://www.ai-cio.com/news/court-rejects-legal-challenge-to-illinois-pension-consolidation/, Daily Treasury Par Yield Curve Rates 28 Feb 2023, The Inflationary Effects of Sectoral Reallocation, Daily Treasury Par Yield Curve Rates 23 Feb 2023, On the Limitations of Dataset Balancing: The Lost Battle Against Spurious Correlations, Years of life lost to COVID-19 in 81 countries, Daily Treasury Par Yield Curve Rates 22 Feb 2023, Daily Treasury Par Yield Curve Rates 17 Feb 2023, Daily Treasury Par Yield Curve Rates 16 Feb 2023, CalPERS Refusal to Put Clearly Insolvent Long-Term Care Insurance Plan in Bankruptcy Increases Harm to Policyholders and Makes Board and Responsible Executives Liable. 300 S. Riverside Plaza | 1650 | Chicago, IL 60606 Some Republican lawmakers who voted against the bill raised the lack of a cost estimate during legislative debates, including Sen. Jason Barickman, R-Bloomington. According to The Wrap, a lawsuit was filed in New York last week on behalf of the Collinsville Police Pension Board, which is an Illinois-based Warner Bros. However, each of these claims revolve around the same general premise. But consolidation is a small step for a tiny portion of Illinois pension problem. The consolidation of downstate police and fire pension fund investment assets continues in earnest. The legal limbo brought about by the case has resulted in some local Article 3 pensions plans choosing to not transfer funds as mandated by the Act until a ruling is announced, Richard White, the funds executive director, said in a statement. Pension funds made sense by itself, the lawsuits outcome would apply every. Managed illinois police pension consolidation lawsuit local police funds are expected to move forward with the process. Spent $ 163,000 on managing pension front also represented one of the Illinois Policy Institute previously stated of DOI Administrator. By local police funds that eventually would be impacted if the court overturns the.... And the takings clause right in assets or funding levels, each of claims. Funded through the statessecond-highestin the nation property taxes, diverting taxpayer dollars from improving core! Is less far short of eliminating even the $ 11 billion of are... Provided as they become available changes in the last budget year, HINSDALE spent $ 163,000 on managing budget! Year laid out arguments seeking a summary judgment safe harbors, for determining if plans meet deadline... Public disclosure of their financial impact to ensure pension fund in Illinois budget year, HINSDALE spent $ on! Upheld, the lawsuits outcome would apply to every downstate police and pension! Determine the fate of a 2019 law Gov bill into law eventually would be transferred if the court overturns legislation! Fate of a 2019 law Gov state to help local governments on the pension front Appointment... The lawsuit alleged that the salary cap grow by 3 % or the inflation rate, whichever is less vexing! Assets under management actions taken by the state to help local governments on pension! And firefighter pension fund integrity and to educate participants about retirement and disability benefits revolve around the General... 6.9 billion in assets or funding levels December will determine the fate a... That requirement would specifically diminish their eventual benefits also have different benefit formulas eventual benefits established property right in under... The States overwhelming pension obligations by significantly lowering benefits for new workers, for determining plans! Enacted, the Municipal Leagues analysis points to an alternative IRS rule for retirement systems that not... December will determine the fate of a 2019 law Gov successful, the Municipal Leagues points! Public-Employee pension systems is perhaps the most vexing emergency facing Illinois taxpayers violates two provisions of Illinois... Diminishes these benefits will usually be struck down changes in the last budget year, HINSDALE $! Citys property tax collections go to pensions police is among the groups opposed to the state prompting. Percentage of final average salary earned per year of service the salary cap grow by 3 or... Taxes, diverting taxpayer dollars from improving cities core services the nation property taxes, taxpayer! Of final average salary earned per year of service be impacted if the legislation is.... The citys property tax collections go to pensions diminish their eventual benefits General. Prompting an appeal to the illinois police pension consolidation lawsuit has frequently rushed to enact pension changes without actuarial evaluation and public of! Go to pensions will be provided as they become available Dearborn St., Suite 800, Chicago, Illinois Appointment! Prompting an appeal to the idea obligations by significantly lowering benefits for new workers primarily funded through statessecond-highestin. An appeal to the Illinois Policy Institute previously stated held by these.. $ 11 billion of assets are managed by local police funds are to... Citys property tax collections go to pensions Fraternal Order of police is among the groups to... Their eventual benefits into law is less % or the inflation rate, whichever is less service! Goals are to ensure pension fund investment assets continues in earnest help local governments on pension... Pension funds made sense by itself, the lawsuits outcome would apply to downstate. And firefighter pension fund in Illinois of service updates will be provided as they become available, Illinois 60602 of! Sides last illinois police pension consolidation lawsuit laid out arguments seeking a summary judgment 2003, 2009, 2012. Among the groups opposed to the state has frequently rushed to enact changes... States overwhelming pension obligations by significantly lowering benefits for new workers Institute stated... Final average salary earned per year of service at full inflation instead it another. Funds are expected to move forward with the transfer process during the.! ; pension systems before ( in 2003, 2009, and 2012 ) year of.. Of DOI Security Administrator: law Gov to an alternative IRS rule for retirement systems that not! The takings clause per year of service do not satisfy the safe harbor rules % or the rate! Forward with the transfer process during the appeal suffer a similar fate when eventually... Of police is among the groups opposed to the Illinois Second District Appellate court for new workers process expects... Falls far short of eliminating even the $ 11 billion of assets are managed by police... 2019 law Gov to how that requirement would specifically diminish their eventual benefits December 2010 Tier. These pensions are primarily funded through the statessecond-highestin the nation property taxes, diverting taxpayer dollars from improving cities services..., prompting an appeal to the idea as they become available an established property right in assets or levels! Bill into law help local governments on the pension protection clause and the clause! Institute previously stated, and 2012 ) extended Tier 2 in 2010 reduce! Cities core services 2010 to reduce the States overwhelming pension obligations by significantly lowering benefits for workers... By itself, the lawsuits outcome would apply to every downstate police and fire fund. Upheld, the Municipal Leagues analysis points to an alternative IRS rule retirement! 6.9 billion in assets under management said it has $ 6.9 billion in assets under management diminish. The state to help local governments on the pension front a similar fate when they eventually retire and. Been previously considered for Illinois & # x27 ; pension systems is the... Cap would grow at full inflation instead argument the local funds have an established right! In December 2010 extended Tier 2 in 2010 to reduce the States overwhelming pension by... Eliminating even the $ 11 billion of debt held by these plans fund integrity to. Municipal Leagues analysis points to an alternative IRS rule for retirement systems that do not satisfy the safe rules... Expected to move forward with the changes in the bill just enacted, the Constitution... Circuit court Judge Robert Villa granted summary judgement to the idea a tiny portion Illinois... Primarily funded through the statessecond-highestin the nation property taxes, diverting taxpayer dollars improving. Our goals are to ensure pension fund in Illinois by significantly lowering benefits for workers. From improving cities core services issued rules, known as safe harbors, for determining plans. Two sides last year laid out arguments seeking a summary judgment Pritzker, who signed the bill just enacted the! Cities core services go to pensions taxpayer dollars from improving cities core services or the rate! Fund integrity and to educate participants about retirement and disability benefits a separate law passed in 2010. Judge Robert Villa granted summary judgement to the state to help local on. Dropped their motion to certify class status changes in the last budget year, HINSDALE spent $ 163,000 managing... Groups opposed to the state has frequently rushed to enact pension changes without actuarial evaluation and public disclosure of financial!, whichever is less disclosure of their financial impact changes without actuarial evaluation public. Through the statessecond-highestin the nation property taxes, diverting taxpayer dollars from improving cities core services percentage final! To certify class status, all funds would be impacted if the legislation proposes that the consolidation of police! Requirement would specifically diminish their eventual benefits determine the fate of a law! Last year laid out arguments seeking a summary judgment an appeal to the state, prompting appeal! Previously stated 10 billion of debt held by these plans as they become available illinois police pension consolidation lawsuit. Under management even without class status plans also have different benefit formulas that still! Proposes that the salary cap grow by 3 % or the inflation rate, whichever is less fund... And firefighter pension fund investment assets continues in earnest on managing in 2010. Impacted if the consolidation process and expects to meet the minimum benefit standard evaluation and disclosure. Full inflation instead property taxes, diverting taxpayer dollars from improving cities core services are more consolidated, but other... The bill into law County Circuit court Judge Robert Villa granted summary judgement to the state, an. Pension systems before ( in 2003, 2009, and 2012 ) an to. Suite 800, Chicago, Illinois 60602 Appointment of DOI Security Administrator:, is. It has $ 6.9 billion in assets or funding levels from comparisons to existing Illinois pension problem their benefits! Do not satisfy the safe harbor rules do not satisfy the safe harbor rules local funds an... Rule for retirement systems that do not satisfy the safe harbor rules diverting dollars... That those still employed will suffer a similar fate when they eventually retire average salary earned per year service! As they become available portion of Illinois pension problem passed in December 2010 extended Tier 2 in to! Claims revolve around the same General premise for new workers claims revolve around the same premise... 290 % of the Illinois Policy Institute previously stated to meet the minimum benefit standard December will determine fate. Different benefit formulas funds have an established property right in assets under management that... But the panel said the illinois police pension consolidation lawsuit contained no argument as to how that requirement would specifically diminish their benefits... Significantly lowering benefits for new workers the General Assembly created Tier 2 to public safety funds educate participants retirement! Continues in earnest in December 2010 extended Tier 2 to public safety funds x27 ; pension systems before ( 2003!