The statement was not read and no action was taken during the convention to include language allowing a reasonable power of legislative modification (p 21 - 22). The Act does nothing more than require one type of government-created pension fund to transfer assets to another type of government-created pension fund. 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 /. J.B. Pritzker on Wednesday signed into law the consolidation of 649 downstate and suburban police and fire pension plans into two new pension funds. . It also represented one of the rare actions taken by the state to help local governments on the pension front. This is via the pension protection clause, Article XIII, General Provisions, Section 5, Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.. The Courts decision emphasizes over and over again that what binds the General Assembly and the people of Illinois are the key words of Article 13, Section 5, the benefits of which shall not be diminished or impaired. Its a simple ruling: you cant do anything which has the effect of reducing existing or future benefits (and the guarantee of a future Cost of Living Adjustment is included in such promises) so long as this phrase exists in the Illinois constitution. More than $13 billion in debt was owed to local downstate public safety pension plans through 2020, according to Illinois Department of Insurance data. At some point, even with the high multiplier, Tier 2 police and fire benefits might not meet the alternative IRS standards, but the analysis does not suggest the timing of any potential violation. 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. Surviving spouse benefit: Tier 2 eliminated pension benefits for spouses of public safety workers whose deaths occurred before the end of the ten-year period for pension benefit vesting and whose deaths were not duty-related. Further updates will be provided as they become available. 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. But the panel said the complaint contained no argument as to how that requirement would specifically diminish their eventual benefits. 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. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause. Nathan Woodside/Lewis & Clark Community College. Benefits for new workers were not protected by a provision of the Illinois Constitution that bans impairment of pension benefits for existing Tier 1 retirement system members. Any increase in actual returns will be partly due to the consolidated funds ability to invest in riskier investments. Working together, we are helping hundreds of cities across the state of Illinois to alleviate their spiraling property tax burdens, and just as importantly, were showing that Illinois can tackle its most intractable problems," Pritzker said at the time. Illinois lawmakers pass pension sweeteners without knowing the cost, cost $14 million to $19 million more per year. The Illinois Supreme Court ordered the consolidation of lawsuits filed by cannabis dispensary license applicants in an attempt to resolve multiple claims challenging the fairness of the licensing . (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 difference might be accounted for by the proposed change in the calculation of final average salary, which lowers the required multiplier under IRS rules. We hope you find our website helpful! 992, H.R. The Newsletter Bringing the Legal System to Light. 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 Illinois Municipal League, which has advocated for pension consolidation for the past decade, also supports Pritzkers plan. 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). Report of the Illinois Pension Laws Commission 272 (1917). Tier 2 workers receive annual benefit increases upon retirement of 3% or one-half of the rise in the Consumer Price Index (CPI), whichever is less, on a simple-interest basis. 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. That could be a boost for communities being squeezed by pension costs. Opinions expressed by Forbes Contributors are their own. 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. 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 challenging the constitutionality of the 2019 consolidation legislation. 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. . Pension Consolidation Lawsuit - Appellate Court Decision (Arlington Heights Police Pension Fund v. Pritzker) Grayslake Police Pension Fund 10 South Seymour Ave, Grayslake IL 60030-0906 DOI Pension Fund Number POO9600 . 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. 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. This clause has been construed by our court on numerous occasions, most recently in Kanerva v. Weems, 2014 IL 115811. TheFirst Responder Pension Consolidationlaw currently faces a lawsuit challenging it on constitutional grounds, claiming the measure diminishes pension benefits. Illinois Supreme Court Justices all stand before, swearing in ceremonies for Justice Lloyd Karmeier as the chief justice of the Illinois Supreme Court Monday, Oct. 31, 2016, in Springfield, Ill. (AP Photo/Seth Perlman), Chicago Mayor Lori Lightfoots vaguely worded statements, Illinois 1970 constitution is one of only in two in the nation, overturned the legislation in a 2015 decision. Five years later, the Illinois General Assembly amended the Pension Code to limit military service credit to those who applied before September 1, 1974. Because the existing plans are already better funded, theyre able to diversify their investments more, enabling higher returns. In 2019, the Illinois General Assemblypassed a billthat 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. Illinois has nations worst pension debt. 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.). The pension problem: Illinois Quad-Cities turn to borrowing to pay down unfunded pension liability Cities across Illinois are scrambling to find ways to stockpile the money they'll need to. 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 . Consolidating scores of local firefighter and police pension funds could save Illinois taxpayers between $820 million and $2.5 billion in the next five years, according to a report published Thursday by a state task force that's been studying the issue since January. Illinois effort to fix ailing local pensions faces legal hurdle A 2019 law championed by Gov. 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. In December 2019, Gov. 802 South 2nd Street | Springfield, IL 62704 The Plaintiffs have 30 days to appeal the decision. 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. In Illinois most public employees, including teachers and public safety workers (but excluding most members of the State Employees Retirement System), do not have to pay into Social Security. 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. 1970, art. It also said there are another 93 funds currently going through the process to transfer funds on either June 1 or June 24. comeback XIII, 5. Dec 29, 2021. Meanwhile, the asset consolidation process is proceeding. However, that process may be interrupted if a court issues an order staying the transfer of assets. The state judge overseeing the constitutional challenge of Illinois effort to consolidate suburban Chicago and downstate police pension fund assets will render a decision May 20. 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. 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. Governor's Pension Consolidation Feasibility Task Force Report. J.B Pritzker is expected to sign the legislation. 1970, art. The analysis must consider the pension multiplier as well as the growth in the pensionable salary cap. The new Police Officers Pension Investment Fund sought legislation during the spring session to push off the deadline by a year but it stalled. 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. Illinois police, firefighters push back on state control of pensions, In DeKalb, police and fire pension costs use up about, In Peoria, Mayor Rita Ali recently called on state leaders to fix pension costs on which the city will. 3) Increase final average salary. But consolidation is a small step for a tiny portion of Illinois pension problem. 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. They are seeking to maintain local control over pension management. In addition, they must ensure that the financial impact of any proposed Tier 2 changes is fully evaluated by pension actuaries and publicly disclosed before any action is taken by the General Assembly. Taxpayers must not allow Springfield to pretend theyve solved the pension problem. The plaintiffs are seeking to certify the lawsuit as a class action. 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. 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 state constitutions pension clause bars any diminishment or impairment of promised benefits. The panel rejected the argument the local funds have an established property right in assets or funding levels. In the recent case challenging the consolidation, the plaintiffs follow the example of Buddell by maintaining that Public Act 101-0610 has similarly deprived their vested pension benefits. In 1991, the collective ratio was at 75.65% and peaked at 77.31% in 1999. 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. No plaintiff has any right to direct the investment of the monies held by the funds or direct that they receive any different course of payments (either in amount or frequency) beyond that established by statute and the funds. Pensionable salary cap: The Tier 2 pensionable salary cap currently increases at one-half of CPI or 3%, whichever is less. Ill. Const. House Committee Meeting Hide Overview . Illinois is home to the nations worst pension crisis, leaving taxpayers on the hook for $317 billion in unfunded pension liabilities for the five statewide retirement systems. Delegate Green subsequently advised the chairman that he would not offer it because he could get no additional delegate support for the proposed amendment. . Click here to read the full issue brief. Illinois Chicago Office | Illinois Policy The State was able to book immediate savings on its statutorily required pension contributions, which depend on future benefit levels. Later still, the plaintiff tried to apply for military service credit, but was denied because he had not applied before the deadline. 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. 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