SPRINGFIELD — Illinois’ largest government employee unions sued Tuesday to overturn Illinois’ new pension law, ripping the long sought, landmark money-saving changes as outright “theft” from workers that won’t pass a legal smell test.
The timing of the lawsuit served as a political rebuke, dropped on the eve of Democratic Gov. Pat Quinn’s State of the State address — a noon Wednesday speech in which the governor is expected to highlight approval of the pension measure as a reason voters should re-elect him.
The suit, filed in Sangamon County Circuit Court, had been expected following last month’s passage of a bill that seeks to curb annual cost-of-living increases for retirees and to increase the retirement age for many current workers. The goal is to close the state’s worst-in-the-nation $100 billion unfunded public pension liability within 30 years.
The legal action came as a new report from a financial research firm put a price tag on the pension debt carried by every man, woman and child living in Chicago: $18,596. The Morningstar study included the shortfalls for state, City Hall, Chicago Public Schools and Cook County government worker retirement systems. Chicago ranked highest among the nation’s two dozen or so biggest cities.
Democratic legislative leaders have vowed to help Mayor Rahm Emanuel deal with the $29 billion city pension debt he inherited, but the lawsuit could complicate those efforts. Emanuel has said huge property tax hikes and service cuts could result if nothing is done.
While other employee and retiree groups already had filed legal challenges to the state pension law, the latest lawsuit carries the weight of Illinois’ largest public sector unions. The We Are One Illinois coalition includes the Illinois AFL-CIO, the American Federation of State, County and Municipal Employees, the Service Employees International Union, the Illinois Federation of Teachers, the Illinois Education Association and other public unions.
In short, the unions argue that the workers upheld their end of the bargain by paying into the pension systems throughout their careers but that governors and lawmakers short-changed the systems for decades, causing the shortfall to grow dramatically.
“Our suit makes clear that pension theft is not only unfair, it’s clearly unconstitutional,” said Illinois AFL-CIO President Michael T. Carrigan in a statement. “Teachers, nurses, emergency responders, and other workers and retirees will not stand by while politicians try to take away their life savings illegally.
“The legislature and governor shirked their responsibility to uphold the constitution,” said Carrigan, the leader of the union coalition.”We are seeking justice in court to right their wrongs. Promises must be kept, and the rule of law must prevail over politics.”
Quinn pleaded with legislators to act on reducing the state’s pension liability for more than two years before signing the law in December. His spokeswoman termed the latest lawsuit as “no surprise” and said the governor stood ready to defend it.
“The law squarely addressed the most pressing fiscal crisis of our time by erasing the state’s … pension debt,” Quinn spokeswoman Brooke Anderson said. “It had to be done to ensure retirement security for those who have faithfully contributed to the pension systems and to support economic growth.”
The lawsuit seeks class-action status on behalf of more than 621,000 people the unions contend are affected — current retirees and workers in state pension systems covering state and university employees and public teachers outside Chicago. Lawmakers’ pensions also are covered by the new law.
As was the case in other lawsuits challenging the new law, the unions cite a provision of the Illinois Constitution which declares public pensions a “contractual relationship” with benefits that cannot be “diminished or impaired.”
The union coalition also contends the pension law is a violation of the state constitution’s contracts clause and breaches another constitutional provision — the so-called takings clause — which prevents a person’s private property from being taken away for public use without “just compensation.”
As part of the “takings” argument, the unions raise the issue of the legal theory of consideration. They counter that provisions in the new law that reduce the current employee contributions to their pensions by 1 percentage point and allow pension systems to file suit to ensure state government pays its proper share for retirement are inadequate and were never agreed upon.
The lawsuit alleged the changes foisted upon public employees are “substantial and will grow in magnitude over the course” a person’s retirement, a point that underscores why the new law is “unconstitutional and unfair.”
By way of example, the lawsuit highlighted the cases of 25 active and retired government workers. One was Chicagoan Lee Ayers, who has worked about 25 years as a clinical lab technician at a state university and expects to get an initial pension of $53,366 when he retires in 2019. Under the new law, he would lose more than $218,000 if he spends 25 years in retirement, the lawsuit contended.
In contrast, the new law lowers the regular pension deduction from his paycheck by 1 percentage point. That means he’d get to keep an extra $3,733 before he retires — a major difference from what he’d give up, according to the court papers.
Senate President John Cullerton, D-Chicago, called the pension law a “test case” that needed to be sent to the courts to determine what could be upheld. Democratic Rep. Elaine Nekritz, D-Northbrook, noted that the clause in the state constitution that prohibits pensions from being impaired or diminished coincides with the legislature’s desire to ensure the pension systems don’t run out of money.
House Republican leader Jim Durkin of Western Springs said the pension changes represented “reforms necessary to improve the fiscal well-being of our state and the pension systems.”
“We have laid down a proper foundation to withstand scrutiny,” Durkin said. “It is now in the hands of the courts. We need to let the process play out.”
Tribune reporters Dardick and Pearson contributed from Chicago.