Illinois Unions Challenge Pension Reforms /cms/images/spacer.gif

January 9, 2014 08:00 AM

Unions say reforms violate state constitution

Illinois Gov. Pat Quinn (D.) /      

BY: Bill McMorris 
January 9, 2014 8:59 am

Labor special interests in Illinois have filed two lawsuits to dismantle pension reforms that are expected to save taxpayers tens of billions of dollars.

Gov. Pat Quinn (D.) signed "historic" changes to the Illinois public employees retirement systems in December that are designed "to address the most dire fiscal challenge of our time."

Those changes, which include raising retirement ages, cutting automatic cost of living adjustments, and creating 401(k)-style pension plans, have been challenged by separate lawsuits filed by retired school administrators and teachers. The lawsuits allege that the pension reforms violate the state constitution, which states "the benefits of [pensions] shall not be diminished or impaired."

"Careers, retirements, personal investments, and medical treatments have been planned in justifiable reliance not only on the promises that were made in collective bargaining agreements and the Illinois Pension Code, but also on the guarantee" of the state constitution, the lawsuit says.

Quinn, who was narrowly elected in 2010 with overwhelming support from public labor unions, spent the past two years expending political capital to get the pension reform passed. His administration defended the law, saying that it had anticipated such legal challenges when drafting the legislation.

"This law is as constitutionally sound as it is urgently needed to resolve the state’s pension crisis," a spokesperson said in a statement. "We’ll defend the interests of taxpayers."

Other indebted government entities have faced similar lawsuits from labor unions in the recent past and won. A federal bankruptcy judge ruled that Detroit could use pension cuts to resolve the city’s $19 billion budget hole, despite a similar pension protection in the state constitution.

Illinois has the most indebted pension system in the nation. While some estimates put the debt as high as $300 billion, the state acknowledges that it is $100 billion short of fulfilling its retirement obligations to employees. The Teachers Retirement System accounts for about half of the debt.

Adam Andrzejewski, head of state transparency group, said that the legal challenge demonstrates that special interest groups like the Illinois Association of School Administrators (IASA) and Illinois Retired Teachers Association, which brought the suits, are using the taxpayers as a piggy bank to finance inflated retirement benefits for their members.

"Too much is still not enough for these highly compensated school administrators and managers," he said. "They are going to fight like rat terriers to hold on to their largess."

Andrzejewski’s group has revealed in previous studies that there are more than 400 school administrators in the state that earn more than the nation’s governors without setting foot in a classroom. Nearly 5,000 of these retired officials receive six-figure paychecks from the state each year, according to Andrzejewski.

"The highly compensated beneficiaries of the government spending machine are very serious about holding onto every red cent. Retired school superintendents have drained hundreds of millions of dollars out of the Teachers Retirement System," he said. "These school administrators and managers feel entitled and have justified the greed in their own heads a long time ago."

The IASA vowed to take the pension reform battle "all the way to the Illinois Supreme Court" in a letter circulated after the law’s passage. The Quinn administration is prepared to meet them head on.

"This historic law squarely addresses the most pressing fiscal crisis of our time by eliminating the state’s unfunded pension debt, a standard set by the governor two years ago," the spokesperson said in a statement. "These lawsuits come as no surprise and we expect the landmark reform to be upheld as constitutional."

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