CHICAGO – A group of Illinois school administrators and retired teachers filed a class-action lawsuit Friday seeking to have the new law aimed at eliminating Illinois’ worst-in-the-nation pension shortfall thrown out, a long-anticipated move that is expected to delay implementation of the sweeping measure.
Lawyers for the eight plaintiffs filed the lawsuit in Cook County Circuit Court on behalf of administrators and retired teachers who are not members of labor unions. It argues the pension bill approved by the Legislature and signed by Gov. Pat Quinn earlier this month violates a clause of the state constitution that says pension benefits may not be cut. It also asks the court to void the law, which is scheduled to take effect June 1.
“That guarantee, perhaps more so than anything else in the Illinois Constitution, was used by countless families across Illinois to plan careers, retirements and financial futures,” the 12-page lawsuit says. “Many of them know that constitutional guarantee by heart.”
The suit names as defendants Quinn, Comptroller Judy Baar Topinka and the board of the Teachers’ Retirement System, the pension system for educators and school administrators. The Illinois Education Association and Illinois Federation of Teachers, as well as other public-employee unions, have said they also plan to sue on behalf of their members. Those lawsuits are expected early next year.
Quinn spokeswoman Brooke Anderson said Friday the administration expected the lawsuit, just as it expects the “landmark reform” will be upheld.
“We believe the new law is as constitutionally sound as it is urgently needed to resolve the state’s pension crisis,” Anderson said in emailed statement. “We’ll defend the interests of taxpayers.”
Illinois’ five public retirement systems are $100 billion short of meeting the state’s obligations to workers and retirees. The law’s supporters say it’ll reduce the unfunded liability by about $21 billion and fully fund the pension systems by 2044. They also estimate it will save the state about $160 billion over the next 30 years.
The plan reduces the annual cost-of-living increases for retirees and raises the retirement age for workers 45 and younger. It also puts some savings back into the pension funds and directs money from pension bond payments to the retirement systems after those bonds are paid off in 2019.
The state’s pension crisis is the result of decades of lawmakers skipping or shorting payments. As the unfunded liability grew, so did the state’s annual payments. In 2013, they reached about $6 billion – or one-fifth of the general funds budget – and siphoned money from schools, social services and other areas. The shortfall also caused major credit rating agencies to downgrade Illinois to the lowest credit rating of any state.
Still, for years lawmakers in the Democrat-controlled Legislature failed to come up with a deal to solve the state’s pension woes. In late November, following months of meetings of a bipartisan conference committee, the Democrat and Republican leaders of the House and Senate emerged from closed-door negotiations and said they had reached an agreement. Less than a week later, the Legislature approved the plan during a special session.
Quinn and other supporters of the law say it was critical to getting Illinois back on solid financial footing. To bolster their legal case, they included an unusual three-page preamble laying out the state’s bleak financial picture.
Lawmakers also included two components they say were intended to improve the plan’s odds of surviving a legal challenge: a 1 percent decrease in employee contributions and a funding guarantee, which allows the systems to sue the state if lawmakers don’t make the payments.
But critics say the law is unfair to workers and retirees who for years contributed to the funds while the state did not.
Among the other changes included in the law is a cap of about $110,000 on the annual salary on which a pension may be based. The plan also gives some workers the option of freezing their pension and participating in a 401(k)-style defined contribution plan, and prohibits non-government employees such as union bosses from collecting a pension.