Employees of the Chicago Park District, represented by the Service Employees International Union have challenged the constitutionality of a state law reforming the Park District’s public employee pension fund, which supporters believed would help the district stabilize its pension liabilities.
On Oct. 8, SEIU Local 73 and named plaintiffs, Chicago Park District retiree David Biedron and current Chicago Park District employee Heather Kelly, filed suit in Cook County Circuit Court against the Park District’s pension fund, formally known as the Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund.
The lawsuit is intended to challenge the legality of Illinois’ Public Act 098-0622. Passed by the Illinois General Assembly and signed into law by former Gov. Pat Quinn in 2014, the law was intended by supporters to stabilize the Park District’s underfunded pension liability and bring the Park District pension fund’s funding ratio to 90 percent by 2049.
In 2012, just before the law’s introduction, the Park District’s unfunded liability stood at $550 million, and was projected to run out of funding by about 2022, according to the Civic Federation.
The law, which took effect Jan. 1, 2015, enacted several changes to the Park District’s pension fund, including increasing retirement ages for so-called Tier 1 employees who were younger than 45 years old before the law took effect; matching the automatic annual increases for existing retirees, Tier 1 and Tier 2 employees at 3 percent or 0.5 CPI; increasing employee contributions by 1 percentage point, to 10 percent immediately, with increases to 11 percent in 2017 and 12 percent in 2019; increasing the Park District’s contribution rate from 1.1 to 1.7 times the employees’ contribution immediately, with further increases to 2.3 times in 2017 and 2.9 times in 2019; and requiring supplemental contributions from the Park District of $12.5 million in 2015 and $50 million in 2019, among other changes.
In the lawsuit, however, the SEIU contended the Park District pension fund changes, like all other attempts at public pension reform in Illinois, is an illegal violation of the Illinois Constitution’s pension provisions.
In the past few months, the Illinois Supreme Court has shot down other attempts at reforming the state’s public employee pension systems in an attempt to avert or forestall severe financial difficulties a number of observers within and outside Illinois have warned could be coming with no changes to the state’s pension system. The state’s high court, however, has sided with state employees who contend the state Constitution does not allow lawmakers to change the pension systems in any way that could be construed as impairing or diminishing workers’ current or future retirement earnings.
In its complaint, the SEIU has argued the Park District’s specific pension reform measure represents a similar diminishment and impairment of the retirement earnings of current and retired Park District workers.
In the case of Kelly, who the complaint says currently works as a park supervisor, the changes to the pension’s retirement age provision would compel her to work eight years longer to collect her retirement benefits than she would under the pension system in existence when she first became a Park District employee and began accruing retirement benefits from the District. Before, she would have expected to retire at 50 years old and collect 72 percent annuity. Under the system created by the new law, she would have needed to work until she was 58 to retire and collect those benefits.
Further, the SEIU argued the pension reform law’s changes to the automatic annual increase formula would likely cause the automatic increases anticipated by workers and retirees to be cut.
As an example, the SEIU noted, under the old system, retirees could expect a 3 percent annual increase in annuity payments. But under the new system, the increase would be pegged to the lesser of 3 percent or half of the Consumer Price Index. This, the SEIU said, would mean under the most recent CPI calculation, retirees would need to hope for a CPI increase of 6 percent to get the same level of increase they had expected before.
And the SEIU argued workers and retirees have been harmed by the law’s other provisions, including elimination of the automatic annual increases from 2017-2019, and diminishments to the amount the Park District’s pension fund would need to pay to employees pushed into retirement because of a disability suffered while a Park District employee.
The SEIU complaint asks the court to declare the Park District pension reform law unconstitutional, and to issue preliminary and permanent injunctions blocking the law’s provisions and to restore all “pension benefits of all adversely affected participants of the Chicago Park District Pension Fund that were diminished or impaired” by the law.
The SEIU and Park District employee plaintiffs are represented in the action by attorneys Joel A. D’Alba, Ryan A. Hagerty and Amanda Clark, of the firm of Asher, Gittler & D’Alba, of Chicago.