A Cook County judge has ruled pension boards managing the retirement funds for police and firefighters in Harvey can’t use an Illinois state law to force the city to use a portion of its federal COVID relief funds to help pay for pensions.
On June 25, Cook County Judge Raymond W. Mitchell rejected the request from the Board of Trustees for Harvey Firefighters’ Pension Fund for a court order requiring the state of Illinois to divert money from Harvey’s coronavirus relief funds into the pension funds for Harvey’s firefighters and police officers.
“The coronavirus relief funds at issue here are not State funds,” Judge Mitchell wrote in his order. “They are not the product of tax revenue that the State collects and then disperses to municipalities.
Cook County Circuit Judge Raymond Mitchell
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“These are federal funds made available to State and local governments to meet the challenges of the coronavirus pandemic.”
The dispute landed in Cook County Circuit Court in May, adding a new wrinkle to a previously settled legal fight between the south suburban city of Harvey and its firefighter and police pension boards over the city’s contributions to those pension funds.
In 2018, Harvey and the pension boards tussled in court over claims by the pension boards that the city government had underfunded pensions and should be required to pay funds from the city’s sales tax to pay pensions.
The pension boards then became the first such public worker pension management system to use a recent Illinois state law to ask Illinois State Comptroller Susana Mendoza to grab those sales tax dollars, and hand them over to the pension funds.
After fighting the state’s interception of the tax money, Harvey and the pension boards reached a deal, under which the city would dedicate a portion of the money to pensions.
Earlier this year, however, the federal government passed a broad relief package, which included billions of dollars to help state and local governments deal with budget holes caused by lost tax dollars amid lockdown measures and other interventions ordered by Gov. JB Pritzker and other governors across the country in response to the COVID-19 pandemic.
It was expected the city of Harvey, like many other local governments across Illinois, would receive a share of those COVID relief funds. Those funds will be distributed to the city and other local governments later this year, under a program still being developed by the Illinois Department of Revenue.
It is not known how much money the city of Harvey would receive from the relief package.
However, the firefighter and police pension funds filed suit in mid-May, asking Judge Mitchell to use state law and the terms of the earlier settlement agreement to order the Comptroller’s office to intercept 10% of Harvey’s COVID relief dollars, and divert it to the police and firefighter pension funds.
In response, attorneys for the city argued such interception and diversion of funds to pay pensions should not be allowed. The city argued the money was only received by the state from the federal government, and was not tax money collected by the state on the city’s behalf. So, the city said, the money cannot be subject to the state pension fund interception provisions.
Further, the city argued, the terms of the relief package itself expressly prohibited the use of such relief money to pay for public worker pensions in Illinois or elsewhere.
“The Board’s cavalier attempt to circumvent Congress’ express restrictions upon the use of Federal Recovery Funds and illegally divert them into the Firefighters’ pension fund thus not only imperils Harvey’s receipt of these sorely needed funds, but also unnecessarily risks their complete forfeiture and return to the federal government to the benefit of no one,” Harvey wrote in a brief filed in response to the pension boards’ complaint.
Attorney Robert Fioretti, who is representing the city of Harvey in the matter, noted the question carried potential national implications, as a ruling in favor of the pension boards in the matter could result in other public worker pension managers seeking to use similar laws in other states to step around Congress’ intent and claim a chunk of the COVID relief pot.
Judge Mitchell, however, sided with the city on the key questions in the matter.
“The federal statute providing for the coronavirus relief funds expressly prohibits those funds from being used to pay pension liabilities,” Judge Mitchell wrote. “… These provisions manifest a Congressional intent to prohibit any of the coronavirus relief funds from being used to pay State or local pension liabilities.”
The pension boards have been represented in the case by attorneys with the firms of Schwartz & Kanyock, and of Moirano Gorman Kenny, both of Chicago.