The Illinois Supreme Court has struck down the measure enacted in 2014 to help address the poor financial condition of Chicago’s public pension plan. In Jones v. Municipal Employees' Annuity and Benefit Fund of Chicago (2016 IL 119618 (March 24, 2016)), the Court said that Public Act 98-641 is unconstitutional.
The measure, enacted June 9, 2014, provides that Chicago’s funding contribution will progressively increase, leading to actuarially based payments beginning in 2021 so that the city’s pension funds would be 90% funded by 2055. The law also increases the required employee contributions. City employees had been contributing 8.5% of their salary; under this law, their contributions increase by 0.5% each year from 2015 to 2019, when the contribution reaches 11% of salary. The contribution then stay at 11% unless the funds reach 90% funding; at that point member they would drop to 9.75% as long as the fund maintains the 90% funding ratio.
The Circuit Court of Cook County found that the law is unconstitutional and permanently enjoined its enforcement because, it said, the law diminishes pension benefits in violation of the state constitution’s pension protection clause. The circuit court also found that the General Assembly would not have enacted Public Act 98-641 without the provisions it held unconstitutional. The state Supreme Court agreed with the circuit court and upheld its ruling.
The measure, enacted June 9, 2014, provides that Chicago’s funding contribution will progressively increase, leading to actuarially based payments beginning in 2021 so that the city’s pension funds would be 90% funded by 2055. The law also increases the required employee contributions. City employees had been contributing 8.5% of their salary; under this law, their contributions increase by 0.5% each year from 2015 to 2019, when the contribution reaches 11% of salary. The contribution then stay at 11% unless the funds reach 90% funding; at that point member they would drop to 9.75% as long as the fund maintains the 90% funding ratio.
The Circuit Court of Cook County found that the law is unconstitutional and permanently enjoined its enforcement because, it said, the law diminishes pension benefits in violation of the state constitution’s pension protection clause. The circuit court also found that the General Assembly would not have enacted Public Act 98-641 without the provisions it held unconstitutional. The state Supreme Court agreed with the circuit court and upheld its ruling.
Chicago’s pension system has a funding gap of $8 billion, reports the Associated Press, and will be insolvent in 15 years if something isn’t done.
Before the Court’s ruling but perhaps in anticipation of it, Chicago Mayor Rahm Emanuel (D) unveiled a plan to use $220 million in short-term financing so that the city can make a payment to its pension funds as the state requires, according to the Chicago Sun Times. That payment is higher than that anticipated in the city’s 2016 budget, says the Sun Times.
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