May 08--The impact of an Illinois Supreme Court ruling tossing out a state law that changes government is likely to be felt at City Hall.
The decision set a standard that could affect changes Mayor Rahm Emanuel engineered to pension systems for city workers and laborers. And the ruling, in turn, will play out as Emanuel negotiates a pension fix for the pension systems covering Chicago police and firefighters.
Like the state, the changes to the pension funds covering laborers and city workers cut future benefits by reducing annual cost-of-living increases in benefits.
The city changes also require workers to pay more toward their retirements. In exchange, the city is ramping up its payments into those funds until the increase hits $250 million a year in 2020.
But those changes to the city pension systems are being challenged in court by some unions and retirees, and their arguments are essentially the same as the ones made in the state case: the Illinois Constitution holds that pension benefits, once granted, cannot be diminished or impaired. The state Supreme Court ruling Friday held that protection as absolute, likely dealing Emanuel's pension law a fatal blow down the road.
Emanuel said Friday he had not had a chance to read the ruling yet and wanted to consult with city attorneys. The mayor tried to draw a distinction that the city's pension changes were agreed to by 28 out of 31 unions and held out hope that his law might meet a different fate.
"I do think there's a significant degree of separation between the ruling on the state bill, which is known as Senate Bill 1, which refers to the state pension, versus the city pensions as it relates to what we worked through with labor and municipal, in the sense that we worked with labor, negotiating, and got an agreement with 28 out of 31 unions, and that's a big distinction from what happened with the state," Emanuel said as he left a groundbreaking for a biomedical center at Northwestern Memorial Hospital downtown. "There was no consensus there."
The mayor acknowledged that it's "not an illegitimate short-term" concern the pension ruling is likely to take up much of the focus at the Capitol to the exclusion of city of Chicago issues the mayor hopes to push in Springfield, like changes to the city's police and fire pension systems and a city-owned casino.
The city in recent years has seen its creditworthiness rating repeatedly downgraded -- to two notches above junk status -- because of the city's $20 billion pension shortfall and borrowing practices that the mayor has vowed to change. Bond rating agencies have warned of further damage to the city's financial condition if the courts reject the city changes.
The ruling also could affect ongoing negotiations with police and firefighter unions over those two pension systems. Absent changes to those systems, the city will have to boost its pension payments by $550 million next year.
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