Illinois Supreme Court Upholds Consolidation of Municipal Pensions in 2019

The Illinois Supreme Court made a significant ruling on Friday, declaring that a law passed in 2019, which sought to merge municipal police and firefighter pensions into consolidated funds, is unconstitutional.

A new law has made a significant move by consolidating a total of 649 municipal pension funds into only two funds. These two funds will now be exclusively focused on meeting the needs of police officers and firefighters. It’s worth noting that Chicago’s pension funds were not affected by this legislation.

The legislation garnered broad support from both Democrats and Republicans, as well as endorsements from the state’s top police and firefighter unions and the Illinois Municipal League.

During the oral arguments on November 21, 2023, Richard Huszagh, the Assistant Attorney General of Illinois, emphasized that the purpose of the act was to reduce excessive administrative fees by tens of millions of dollars per year. Furthermore, the act aimed to streamline the investment process and consolidate investments to ultimately generate higher long-term returns.

Local pension boards will retain their authority in managing benefits, and there will be no transfer of assets or liabilities between local plans. The state has been faced with unexpected legal action initiated by a coalition of local pension funds, led by the Arlington Heights Police Pension Fund.

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During a passionate debate, they asserted that the law violated the rights of their members by shifting the control of significant funds from local boards to statewide elected officials. They contended that this action contravened the pension clause in the state constitution.

“The plaintiffs’ attorney, Daniel Konicek, argues that the inclusion of statewide individuals in the new boards has greatly reduced the organization’s ability to appoint individuals they are familiar with to the five-person board.”

According to their argument, diluting voting rights can be seen as a decrease in benefits, which they claim is a violation of the pension clause.

The justices had different opinions on the matter. Chief Justice Mary Jane Theis, in the court’s decision, stated that the pension clause does not include voting rights in its protection. It is important to note that the law did not change the protection of monetary benefits.

Illinois Governor JB Pritzker responded to the court’s decision with a statement on Friday.

The Illinois Supreme Court has upheld the constitutionality of a bipartisan pension reform law, highlighting Illinois’ ability to successfully implement thoughtful and strategic pension reform.

In my first term as governor, working alongside my colleagues in the General Assembly, we achieved significant reform after decades of unsuccessful attempts.

This landmark decision marks the beginning of a new era of responsible fiscal management, which includes the consolidation of over 600 local pension systems.

The goal is to improve investment returns and reduce fees, ultimately easing the burden on taxpayers. Fulfilling yet another campaign promise, this ruling is celebrated as a victory for the people of Illinois, local authorities, and the courageous first responders.

 

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