The Illinois Supreme Court on Tuesday heard arguments in a case alleging the state’s 2019 law that consolidated nearly 650 individual police and firefighter pension funds actually hurt retirees by diluting their voting power.
The nearly three-dozen pensioners and 17 individual pension funds that sued over the law have already lost twice in lower court. But their attorney on Tuesday was insistent the retired police and firefighters were wronged when Gov. J.B. Pritzker signed the law – passed with overwhelming bipartisan majorities in the General Assembly – that consolidated the 649 funds into two.
The pair of funds – one that manages pensions for retired police and the other for retired firefighters – were consolidated in order for them to access bigger investments previously not available to the hundreds of small individual funds, all in the hopes of yielding larger returns.
Consolidation also eliminated administrative costs paid out of the individual pension funds.
But attorney Daniel Konicek said his clients’ objection wasn’t about the money, but rather their say in how the money is managed.
“It completely, undeniably diluted their ability to put people on a five-person board that they knew, versus these new boards of people that are statewide and (they) don't know,” Konicek told the justices.
But nearly before he was done speaking, Justice Mary K. O’Brien cut in.
“How does that impact whether or not they get a check at the end of the month or on the 19th of the month?” she asked.
Konicek didn’t directly answer, noting that interpretation was what the lower courts had relied on. Instead, he urged the justices to look at the court’s previous decisions in pension-related cases, particularly in the last decade.
In 2014, for example, six of the seven justices on the court ruled the “pension protection clause” in Illinois’ constitution prevented the state from reducing health care benefits to retirees. The constitution stipulates that membership in any government retirement system in Illinois is “an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
So, Konicek argued, in ruling that the pension protection clause extends to more than just pension benefits alone, the court should also find that voting rights for local pension funds is also a benefit that members are guaranteed.
“Isn't it accurate that even in (the 2014 case) we were talking about something that…reduced the financial benefit?” Justice Joy Cunningham asked. “It was about money, not voting.”
In 2015, the court unanimously ruled that Illinois’ constitution prevented the General Assembly from enacting a massive pension overhaul plan that would’ve cut state retirees’ annual three percent compounded cost of living adjustments – one of the main drivers of the state’s ever-growing unfunded pension liabilities.
Chief Justice Mary Jane Theis, the only justice left who was on the court a decade ago, asked the bulk of questions to Konicek, and even toward the end of his rebuttal still was unclear about the “benefit” he was arguing was impaired in this case.
“So again – let’s be real clear – what is the benefit that has been diminished?” Theis asked. “That members no longer have a vote as to who makes the investment decisions?”
Konicek affirmed her assertion before wrapping up his arguments.
Assistant Attorney General Richard Huszagh sought to further bolster justices’ apparent skepticism about financial benefits to pensioners not being affected by the law.
“It does not reduce by a penny the payments made to any member,” he said, further noting the individual pension funds are still able to determine for themselves whether, for example, a member is eligible for disability, and the formula for those payments.
Huszagh also told the justices that Konicek and his clients are “asking the court to overrule 50 years of its own precedent” that he argues defines “very clearly” what benefits are and are not protected by Illinois’ constitution.
He warned that the court ruling in the plaintiffs’ favor would “open up a giant can of worms” as such a ruling would then call into question many other changes made to pension fund administration in the last 50 years since the state constitution was ratified – including a state law that requires pension funds to hire investment advisors.
“Well, that would be unconstitutional because somebody would consider it a benefit not to have investment advisors and not to incur those expenses,” Huszagh said. “There's no stopping point for where they want to go with this case.”
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