Retired Illinois teachers sue state over pension law

Lawsuit claims changes violate protections in Illinois constitution for retirement benefits of public sector workers

In this Jan. 3, 2013 file photo, a woman attends a rally by Illinois state union members and supporters in support of fair pension reform at the Illinois State Capitol in Springfield.
Seth Perlman/AP

A group of teachers and public school officials filed a class-action lawsuit Friday in state court seeking to void Illinois' new pension reform law on grounds the cuts to pension benefits violate the state constitution.

The lawsuit, filed in Cook County Circuit Court in Chicago, claims that changes to current and retired teacher pensions passed by the Illinois General Assembly and signed into law by Gov. Pat Quinn earlier this month violate a clause in the Illinois Constitution which says pension benefits can't be cut. 

"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 reads. "Many of them know that constitutional guarantee by heart."

It also asks the court to void the law, which is scheduled to take effect June 1.

With Illinois' finances buckling under a $100 billion unfunded pension liability, the controversial measure reduces and suspends cost-of-living increases for pensions, raises retirement ages and limits the salaries on which pensions are based.

A similar measure in California was found invalid on Dec. 23 when a state court judge barred the city of San Jose from imposing voter-approved pension cuts on current municipal workers. This set an important precedent as public employee unions and many U.S. cities lock horns over retirement costs blamed for municipal budget crises.

Illinois' 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.

State: We'll defend taxpayers

"We believe the new law is as constitutionally sound as it is urgently needed to resolve the state's pension crisis," said Brooke Anderson, spokeswoman for Gov. Quinn, in a statement emailed to The Associated Press. "We'll defend the interests of taxpayers."

The lawsuit names Quinn, Illinois Comptroller Judy Baar Topinka and the Illinois Teachers' Retirement System's (TRS) board of trustees as defendants and seeks preliminary and permanent injunctive relief.

It was filed as a class action, representing retired and active members of TRS, who are not currently members of any teachers' labor union. It is also only the first shot of litigation against the law, which a coalition of public labor unions has vowed to fight.

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.

But critics say the law is unfair to workers and retirees who for years contributed to the funds while the state did not. The law offers workers and retirees some sweeteners, including a reduction in contributions toward pensions and a method for ensuring the state fully makes its contributions.

Major credit rating agencies saw the law as a positive development but also cited implementation risk for the law due to litigation.

The educators' lawsuit cites an Illinois constitutional provision that deems membership in any state retirement system to be an enforceable contractual relationship, "the benefits of which shall not be diminished or impaired."

The pension reform law includes a preamble section seemingly designed to counter a legal challenge that concludes Illinois' fiscal problems could not be solved without changes to the retirement system structure.

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