Chicago pension decision silver linings

Despite striking down a pension-reform package aimed at reducing Chicago’s pension debt, the Illinois Supreme Court opened the door for future legislative reforms.

The Illinois Supreme Court struck down a state law attempting to reform Chicago’s pension funds March 24, but the news for pension reform isn’t all bad.

One piece of good news is the court acknowledged the government can adjust pension benefits if workers agree to it in exchange for some other benefit.

Another bit of good news is the court ruled that any pension-funding guarantee the state might enact would not be protected by the state constitution’s pension clause.

The pension-funding guarantee came up in the case because the Chicago reform bill would have required the city to get its pension systems up to 90 percent funded by 2055. The city argued this provision gave city employees a new “benefit,” offsetting the law’s reduction in their pension payouts, by ensuring there would actually be money to pay them when the time comes.

The court ruled the funding guarantee was not an offsetting “benefit” in part because it was not the type of benefit the pension clause protects. The pension clause protects an employee’s right to receive pension payments upon retirement; it does not give employees the right to demand government put enough money in its pension funds now to ensure that there will be enough money to pay retirees later. The court concluded that because the bill’s funding guarantee was not protected by the pension clause, it was not really a guarantee at all; the General Assembly could repeal it at any time without running afoul of the pension clause.

This is important because it means the General Assembly cannot put taxpayers irrevocably on the hook to keep government pension systems funded at any particular level, as politicians have attempted to do in the past.

This aspect of the court’s ruling does not help solve Illinois’ state and local pension crises, however, because the court reaffirmed that, when pension payments come due, workers are entitled to them in any event, regardless of whether the government (and taxpayers) can afford the cost.