City of Chicago Fights Court’s Rejection of Pension Reform Bill

Published January 13, 2016

Lawyers representing the City of Chicago are appealing a 2014 court case rolling back public pension reforms signed into law by former Illinois Gov. Pat Quinn (D) in the Illinois Supreme Court

In 2014, Quinn signed a pension reform bill into law, increasing the amount Chicago public employees must pay toward their own health care and retirement funds and reducing entitlements paid out by the Municipal Employees’ Annuity and Benefit Fund of Chicago.

In July 2014, Cook County Circuit Court Judge Rita Novak declared the reforms unconstitutional, undoing Quinn’s pension changes because it “diminished or impaired” previous pension contracts.

‘Highly Distorted’ Priorities

Stephen Moore, a distinguished visiting fellow with the Project for Economic Growth at The Heritage Foundation, says the Illinois Supreme Court should side with taxpayers.

“They have to have it overturned, because if they don’t, it’s going to lead to a serious crisis in the schools and for roads and public safety.” said Moore. “Those are all secondary to paying pensioners, and I just think that’s a highly distorted set of priorities.”

A reversal of the 2014 decision could have positive effects far beyond Illinois, Moore says.

“I think that reversing that precedent is important, not just for the functioning of government in Illinois, but it would helpful for other states to avoid this precedent for including pension obligations above all other obligations in the state,” Moore said.

Fiscal Triage

The first step in healing a sick patient is stopping the bleeding, Moore says.

“You can’t undo the past, but all you can do now is try to rectify things going forward, and so as a first step they have to stop the bleeding,” Moore said. “This is a state [where] like 25 cents of every tax dollar is for pensions. So that means they are only getting 75 cents of every dollar for public services.”

Calls for Bold Leadership

Ted Dabrowski, vice president of policy at the Illinois Policy Institute, says Chicago lawmakers can press for meaningful reforms regardless of the case’s outcome.

“If Rahm Emanuel, who is on a political hot seat right now, wanted to show that he was bold about making reforms, he would request the legislature pass 401k-style accounts for all new employees, starting tomorrow,” Dabrowski said. “That’s constitutional. It can be done.”

Dabrowski says the time for pension reform is now.

“I think Chicago is at a risk of hitting a spiral—a credit spiral, a funding spiral—a negative one that puts it in deeper trouble than we’re seeing now,” Dabrowski said.

Andrea Dillon ([email protected]) writes from Holly Springs, North Carolina.