Illinois Supreme Court upholds 2020 pension consolidation

Bonds

The Illinois Supreme Court Friday upheld pension consolidation legislation championed by Gov. JB Pritzker that was challenged in court by more than a dozen suburban and downstate police and firefighter pension funds. 

The case, Arlington Heights Police Pension Fund et al. v. JB Pritzker et al., had pitted the governor and General Assembly against a small fraction of the local police and firefighter pension funds affected by the pension fund consolidation passed in 2019.  

In the state Supreme Court ruling, Chief Justice Mary Jane Theis wrote that the plaintiffs had failed to show the legislation — Public Act 101-0610, which took effect Jan. 1, 2020 — had violated either the pension protection clause or the takings clause of the Illinois Constitution.

“Today’s Supreme Court ruling is a victory for Illinois taxpayers, local governments and first responders,” Gov. JB Pritzker said in a statement Friday.

Bloomberg News

The other six judges concurred, making the ruling unanimous.

The legislation pooled the assets of hundreds of local police and firefighter pension funds into two statewide pension investment funds.

A 2023 appellate court decision upheld the Kane County Circuit Court’s 2022 decision, which found that the pension protection clause only covers changes that affect the value of members’ pension benefits, and the takings clause only covers government action against real property.

“The 2020 amendment to the Pension Code has no impact on plaintiffs receiving promised monetary benefits,” Theis wrote. “The Act does not change plaintiffs’ right to elect members of their local funds’ boards or the local boards’ authority to determine the amount of benefits plaintiffs are entitled to receive. It only changes the local boards’ power to invest the assets of the local funds.”

Regarding the takings clause, Theis wrote, the plaintiffs suffered no concrete losses from the pension consolidation legislation: “Plaintiffs have failed to identify any property right under Illinois law that is affected by the 2020 amendment to the Pension Code,” she concluded. “The Act does not impact the pension payments that plaintiffs are entitled to receive.”

There are about 650 local police and firefighter pension funds in Illinois, each of them governed by a five-member board. The boards have two appointed members, two members elected by active members and one member elected by beneficiaries. These local boards continue to control retirement and other benefits.

In the consolidation, each local fund received its own account within the statewide funds. Local pension funds had to cede custody and investment responsibility to the state funds by June 30, 2022.

The legal battle over the pension consolidation has been raging since February 2021. By May 2023, almost all the firefighter funds had transferred their assets into the statewide pension investment fund, but there were 25 holdouts among the police funds, 15 of them plaintiffs in the lawsuit

“[Our people’s] life savings are involved and they feel their right to vote and control” how their contributions are invested is at stake, Daniel Konicek of Konciek & Dillon, which represented the police funds, told The Bond Buyer then.

Pritzker called the ruling “confirmation that smart, thoughtful pension reform can be accomplished in Illinois” in a statement Friday.

“After 70 years of attempts, my partners in the General Assembly and I were able to accomplish meaningful reform during my first term in office,” he said. “We ushered in a new era of responsible fiscal management… Today’s Supreme Court ruling is a victory for Illinois taxpayers, local governments and first responders.”

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