Judge Rules Chicago’s Pension Reform Legislation Unconstitutional

Here’s the latest on Chicago’s public pension crisis. Hal Dardick and Rick Pearson reported on the Chicago Tribune website last night:

Mayor Rahm Emanuel’s administration said it will appeal a Cook County judge’s decision Friday that ruled unconstitutional a state law reducing municipal worker pension benefits in exchange for a city guarantee to fix their underfunded retirement systems.

The 35-page ruling by Judge Rita Novak, slapping down the city’s arguments point by point, could have wide-ranging effects if upheld by the Illinois Supreme Court. Her decision appeared to also discredit efforts at the state and Cook County levels to try to curb pension benefits to rein in growing costs that threaten funding for government services.

The issue of underfunded pensions, and how to restore their financial health, is crucial for the city and its taxpayers. The city workers and laborers funds at issue in Friday’s ruling are more than $8 billion short of what’s needed to meet obligations — and are at risk of going broke within 13 years — after many years of low investment returns fueled by recession and inadequate funding.

Without reducing benefits paid to retired workers, or requiring current workers to pay more, taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation

(Editor’s note: Bold added for emphasis)

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

And the City’s response to the ruling? Mayor Emanuel’s Press Office countered Friday:

Statement of City of Chicago Corporation Counsel Stephen Patton on SB1922

“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court. We now look forward to having our arguments heard there. We continue to strongly believe that the City’s pension reform legislation, unlike the State legislation held unconstitutional this past spring, does not diminish or impair pension benefits, but rather preserves and protects them. This law not only rescues the municipal and laborer pension funds from certain insolvency, but ensures that, over time, they will be fully funded and the 61,000 affected City workers and retirees will receive the pensions they were promised.”

As to the City of Chicago’s credit rating possibly getting whacked after the decision? Timothy W. Martin reported on The Wall Street Journal website Friday afternoon:

Moody’s said Friday’s ruling had no effect on Chicago’s bond grade. But rival Standard & Poor’s Ratings Services, which currently has an investment-grade rating for the city, said that “regardless of the ultimate outcome” of Mr. Emanuel’s pension law, it “will likely lower” its Chicago rating in the next six months, unless city leaders chart out a solution to address its pension problems.

(Editor’s note: Bold added for emphasis)

Like I’ve been saying for a couple years now, that proverbial brick wall keeps approaching for Chicago.

Since City Hall can’t get its affairs in order, Chicagoans might want to look at straightening out theirs if they intend to stick around for the long haul.


Dardick, Hal and Pearson, Rick. “Judge finds city’s changes to pension funds unconstitutional.” Chicago Tribune. 24 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-chicago-pension-ruling-met-20150724-story.html). 25 July 2015.

Martin, Timothy W. “Chicago’s Pension Overhaul Plan Tossed Out by Judge.” The Wall Street Journal. 24 July 2015. (http://www.wsj.com/articles/judge-rules-2014-law-to-reduce-chicago-pension-shortfall-unconstitutional-1437754525). 25 July 2015.

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