A Kane County Judge has determined a pension protection clause in the Illinois Constitution doesn’t automatically invalidate state efforts to consolidate hundreds of local police and fire retirement systems into two larger pension funds.
Judge Robert Villa issued an opinion May 25 on cross motions for summary judgment from several pension funds and individual members who sued the state trying to win a declaration that a state law that took effect Jan. 1, 2020, consolidating about 650 funds, violated the Illinois Constitution’s Pension Protection and Takings clauses.
The state argued “at length that such a drastic change in how Illinois’ police and firefighter pensions are managed (and invested) will bring much needed financial improvements beneficial to both the taxed public and fund beneficiaries," Villa wrote.
In contrast, the pension funds focused their positions on how members can choose board members and the initial funding of the new consolidated programs, one for police retirees and one for former firefighters.
Under the old system, a five-member board governed individual local pension funds. Active members elected two members, beneficiaries elected a third. For the new fund, each has nine members elected statewide: three from officers or executives of the affected municipalities, three from active participants, two from beneficiaries and one whom the Illinois Municipal League nominates for gubernatorial appointment subject to state Senate confirmation.
The funds alleged the new system dilutes members’ voting rights, which they say are derived from their pension status and therefore should be considered a benefit protected by the Illinois state constitution's pension protection clause, which forbids the state from taking action that would "diminish or impair" pension benefits.
They also claim the use of the money in the individual funds at the time of the consolidation to pay for up to $15 million in administrative and startup costs for the new funds violates the Takings Clause.
The consolidation law, Villa wrote, “undeniably diminished the weight of each individual's board member vote.” He said one individual plaintiff used to account for one of 28 votes and now is one of 13,804, but added that “whether this violates plaintiffs’ constitutionally protected rights is not claimed under traditional voting rights protections.”
Because the plaintiffs didn’t bring “claims such as procedural due process, equal protection, constitutional vagueness, improper delegation of legislative authority, and other guarantees found in the United States and Illinois constitutions,” Villa wrote, the question is limited to application of the Pension Clause. And no state court has issued an opinion affirming the funds’ position.
Although there is precedent for establishing the Pension Clause protects benefits beyond just a monetary payout, Villa continued, any case in favor of a plaintiff challenging a denied benefit involved something “that could be directly tied to a chance in the value of their future retirement benefits.”
A change in voting protocol doesn’t directly affect the value of a pension benefit, Villa said, so summary judgment for the state is appropriate.
Turning to the Takings Clause claim, Villa said the funds could only demonstrate legal injury if the $15 million in transition costs legally constitute property.
“Although money damages can be sought in a takings clause claim, there are no allegations or evidence presented that plaintiffs currently drawing their pension benefit have suffered a present or will suffer a future loss in benefit payment,” Villa wrote. “Similarly, there is no evidence that those still employed will suffer a similar fate when they eventually retire. Hopefully, such losses will never materialize.”
Calling the potential for such a loss “speculative,” Villa said there is no evidence or argument the money originally in the local funds is being used for anything other than trying to cover retirement benefits. As such, he granted summary judgment for the state.