State

Chicago says pension overhaul delivers benefits despite cuts

SPRINGFIELD – Lawyers attempted to convince the Illinois Supreme Court on Tuesday that Chicago's plan to save its pension program from insolvency does not violate the state Constitution's protection against reduced benefits because it ensures there will be, for decades to come, money to keep those checks moving.

Or, as city lawyer Stephen Patton put it: "The participants are immeasurably better off with it, than without it."

In the second public pension-overhaul case before the high court in eight months, Patton tried to differentiate his arguments from a separate, landmark pension plan involving state-employee retirement funds that the same justices rejected. Patton said shoring up the city's pension accounts trumps the benefit reductions for 75,000 city workers and retirees.

Lawyers for city workers contesting the law, however, tried to link it directly to the state case, which was argued in March. The court dumped that plan two months later, saying Springfield can't cut into its $111 billion pension-account shortfall by unilaterally reducing benefits – a violation of the 1970 Constitution's "pension protection clause."

The state of Illinois and its largest city aren't alone in struggling with how to cover the decades-old promises made to hundreds of thousands of public-sector workers. Statewide, cities have only 55 percent of the money they need to cover their obligations.

The state Constitution prohibits a promised pension from being "diminished or impaired."

The bailout in question Tuesday was a Legislature-endorsed plan from the spring of 2014 that reduces automatic annual pension increases while requiring a $750 million city property-tax hike over five years to cut down a $19.5 billion deficit in the next four decades.

Lawyers for employees who filed suit argued Chicago is simply trying to poor-mouth its way around the constitutional guarantee because, like the state, the city has shortchanged pensions for years.

"These are defined benefits that are insulated from the political winds that may blow from time to time," lawyer John Shapiro said. "The funding mechanism for employer contributions simply has not met known fund obligations. Now that the result of that disconnect is intolerable, they just don't want to pay for the benefits."

In March, state lawyers argued that "police powers" allowed the government to reduce benefits in times of crisis. Lawyers for the city of Chicago pointed out Tuesday that the Constitution doesn't guarantee funding – only benefits.

The twist here is the "huge financial obligation" the city is making to bolster the accounts with billions of dollars to cover pension debts, Patton said.

Justice Bob Thomas wondered why it matters that someone is promising to pay, because the Constitution prohibits reductions.

"To say, 'You're getting these benefits, you're promised these benefits, and now we're going to promise again to fund it so you get these benefits," Thomas said. "How is that a plus?"

"What use is a benefit unless the money is there to pay it, your honor?" Patton responded.

Shapiro failed to see the value: "Setting aside money to pay what is already constitutionally guaranteed is not a benefit new, or net."

The court took the case for review. It does not announce when it will issue opinions.

SPRINGFIELD – Lawyers attempted to convince the Illinois Supreme Court on Tuesday that Chicago's plan to save its pension program from insolvency does not violate the state Constitution's protection against reduced benefits because it ensures there will be, for decades to come, money to keep those checks moving.

Or, as city lawyer Stephen Patton put it: "The participants are immeasurably better off with it, than without it."

In the second public pension-overhaul case before the high court in eight months, Patton tried to differentiate his arguments from a separate, landmark pension plan involving state-employee retirement funds that the same justices rejected. Patton said shoring up the city's pension accounts trumps the benefit reductions for 75,000 city workers and retirees.

Lawyers for city workers contesting the law, however, tried to link it directly to the state case, which was argued in March. The court dumped that plan two months later, saying Springfield can't cut into its $111 billion pension-account shortfall by unilaterally reducing benefits – a violation of the 1970 Constitution's "pension protection clause."

The state of Illinois and its largest city aren't alone in struggling with how to cover the decades-old promises made to hundreds of thousands of public-sector workers. Statewide, cities have only 55 percent of the money they need to cover their obligations.

The state Constitution prohibits a promised pension from being "diminished or impaired."

The bailout in question Tuesday was a Legislature-endorsed plan from the spring of 2014 that reduces automatic annual pension increases while requiring a $750 million city property-tax hike over five years to cut down a $19.5 billion deficit in the next four decades.

Lawyers for employees who filed suit argued Chicago is simply trying to poor-mouth its way around the constitutional guarantee because, like the state, the city has shortchanged pensions for years.

"These are defined benefits that are insulated from the political winds that may blow from time to time," lawyer John Shapiro said. "The funding mechanism for employer contributions simply has not met known fund obligations. Now that the result of that disconnect is intolerable, they just don't want to pay for the benefits."

In March, state lawyers argued that "police powers" allowed the government to reduce benefits in times of crisis. Lawyers for the city of Chicago pointed out Tuesday that the Constitution doesn't guarantee funding – only benefits.

The twist here is the "huge financial obligation" the city is making to bolster the accounts with billions of dollars to cover pension debts, Patton said.

Justice Bob Thomas wondered why it matters that someone is promising to pay, because the Constitution prohibits reductions.

"To say, 'You're getting these benefits, you're promised these benefits, and now we're going to promise again to fund it so you get these benefits," Thomas said. "How is that a plus?"

"What use is a benefit unless the money is there to pay it, your honor?" Patton responded.

Shapiro failed to see the value: "Setting aside money to pay what is already constitutionally guaranteed is not a benefit new, or net."

The court took the case for review. It does not announce when it will issue opinions.

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