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updated: 1/28/2014 5:07 PM

Labor unions sue over plan to cut pensions

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  • A coalition of public employee labor unions has filed suit over Illinois' plan to cut retirement benefits.

       A coalition of public employee labor unions has filed suit over Illinois' plan to cut retirement benefits.
    Mark Black | Staff Photographer , 2012

 
Associated Press

SPRINGFIELD -- Labor unions filed a lawsuit Tuesday seeking to throw out Illinois' new law aimed at eliminating a worst-in-the-nation pension shortfall, a long-anticipated move that could delay implementation of the landmark measure.

On the eve of a State of the State address by Gov. Pat Quinn, who faces a tough re-election campaign, lawyers for the We Are One Illinois coalition of unions filed the lawsuit in Sangamon County Circuit court. The lawsuit, which follows others already filed by retirees, argues the pension bill approved by the legislature and Quinn signed more than a month ago violates a clause of the state constitution that says pension benefits may not be cut. It also asks the court to stop the law from taking effect until the case is decided.

During Quinn's address Wednesday, he is expected to tout the pension overhaul as a definitive step in ending a crisis he has said he was "put on earth" to solve.

The crisis has created somewhat of a rift between the governor and the state's public employee unions, some of which are top campaign contributors. AFSCME, the state's largest employees union, will hold an endorsement session Saturday, where Quinn and lawmakers supportive of the pension package could see ramifications as they seek re-election bids.

"Know that the pension theft bill, matters of retirement security more broadly will weigh heavily in terms of those endorsement decisions at every level," AFSCME spokesman Anders Lindall said.

Michael Carrigan, president of the Illinois AFL-CIO, said the suit "makes it clear that pension theft is not only unfair, it's clearly unconstitutional."

The 25 named plaintiffs in the suit includes what Lindall describes as a "breadth of representative plaintiffs" -- retired teachers, firefighters, prison workers, and employees of various state agencies.

Illinois' five public-retirement systems were $100 billion short of what was needed to meet the state's obligations to workers and retirees when the legislature passed the measure. Its supporters say the plan will reduce that unfunded liability by about more than $20 billion and fully fund the pension systems by 2044. The governor's office last week estimated the plan will save the state about $145 billion over the next three decades.

The plan reduces the annual cost-of-living increases for retirees and raises the retirement age for workers 45 and younger, giving some workers the option of freezing their pension and participating in a 401(k)-style contribution plan. It also puts some savings back into the pension funds and directs money from pension bond payments to the retirement systems after those bonds are paid off in 2019. Lawmakers also included two components they say were intended to improve the plan's odds of surviving a legal challenge: a 1 percent decrease in employee contributions and a funding guarantee, which allows the systems to sue the state if lawmakers don't provide Illinois' payments to the accounts.

Illinois' pension problem was the result of decades of lawmakers skipping or shorting payments to the systems which siphoned away money away from and social services. The shortfall also caused the major credit rating agencies to downgrade Illinois to the lowest credit rating of any state.

Still, lawmakers in the Democrat-controlled Legislature failed for years to come up with a deal to solve it. In November, the four legislative leaders emerged from closed-door negotiations and said they had reached an agreement. The House and Senate approved the plan the next week.

The law has already undergone legal challenges.

In early January, the Illinois State Employees Association Retirees and the Retired State Employees Association filed class-action lawsuits in Sangamon County Circuit Court.

Quinn and other supporters of the law say it is critical to getting the state back on solid financial footing and predicted the Illinois Supreme Court will ultimately uphold it.

Quinn's spokesman Brooke Anderson said Tuesday the lawsuit came as no surprise.

"We believe it's constitutional and we'll defend the interests of taxpayers," Anderson said.

But public-employee unions and other critics say the law is unfair to workers and retirees who for years made their contributions to the funds while the state did not.

Senate President John Cullerton calls the legislation an important "test case" for the courts as the legislature will begin to focus on other pension reform in the upcoming session, including for the city of Chicago.

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