The Illinois Supreme Court on Thursday struck down a 2014 state law aimed at boosting the sinking finances of two pension funds for Chicago city workers, saying it violated pension protections in the state’s constitution.
The decision by the seven-member court to uphold a lower court ruling was an expected blow to the law that would have increased municipal worker pension contributions and ended a 3 percent annual increase for retirees.
The judges said in their ruling that they did not dispute arguments that a fiscal crisis would make the funds insolvent and that would impact public welfare, but said Illinois constitution prohibits any impairment or diminishment of public-pension benefits.
The Illinois Supreme Court decision, with four justices concurring and none dissenting, was expected after the court used the same legal foundation to invalidate a 2013 law that sought to cut pensions for state government workers.
In Thursday’s ruling, the justices did not dispute findings that Chicago’s public pension funds are heading for insolvency and that would impact public welfare, but said members of the funds have “a legally enforceable right to receive the benefits they have been promised.”
Chicago, the nation’s third-biggest city, has been mired in a financial crisis largely fueled by a $20 billion unfunded pension liability in its four retirement systems.
Combined, the two Chicago pension funds at the center of Thursday’s ruling cover more than 78,000 active or inactive city employees and retirees but have unfunded liabilities exceeding $8 billion.
Without reforms, Chicago warned that the two funds would run out of money within 10 to 13 years.
(Reporting by Dave McKinney; Writing by Fiona Ortiz; Editing by Chizu Nomiyama and W Simon)