A group representing retired state workers on Thursday filed the second lawsuit challenging sweeping changes to the state’s public employee pension system, arguing the measure violates a clause in the Illinois Constitution intended to protect retirement benefits by “gutting” annual cost-of-living increases.
The Retired State Employees Association of Illinois wants a Sangamon County judge to throw out the pension law and set up an escrow fund to deposit the difference in benefits while the matter is sorted out in court.
The lawsuit is one of several expected to be filed against the pension law in the coming weeks, including promised challenges from the state’s major employee unions. Last week, the Illinois Retired Teachers Association sued in Cook County court.
A spokeswoman for Democratic Gov. Pat Quinn, who signed the pension bill into law a month ago, maintained the retirement system overhaul will be upheld as constitutional.
The retired state worker group’s legal argument centers around changes made to the annual cost-of-living adjustments for retirees, which had been set at a 3 percent compounded increase every year. Under the changes, retirees would instead get 3 percent, non-compounding yearly bumps using a formula based on years of service multiplied by $1,000. That $1,000 would increase by the rate of inflation each year.
The benefit cut is a key part of pension changes that supporters say will wipe out a $100 billion state government worker pension debt over 30 years. But the group contends the cost-of-living reduction violates a provision of the 1970 Illinois Constitution stating that membership in a pension plan is “an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Other pension changes include requiring many current workers to skip up to five annual cost-of-living pension increases when they retire. Most current workers also would see a boost in retirement age by up to five years, depending on how old they are.
In an attempt to get around the constitutional constraints, the new pension law offers workers and retirees some trade offs in order to counter benefit cuts. It’s a legal theory known as “consideration.” It calls for requiring current workers to pay 1 percentage point less toward their pensions. The pension systems also could sue to force the state to pay the its required employer share. In addition, a limited number of workers could join a 401(k)-style defined contribution plan.
Critics say that isn’t enough, noting that workers have dutifully paid into the retirement system for years while the state routinely skipped or shorted payments. “For too long, our members have had to endure being scapegoated for the state’s financial problems,” said Bruce Strom, president of the Retired State Employees Association.
In the lawsuit, the group also argues that the new pension law violates the equal protection clause of the constitution because changes were made to just four of the five pension systems. Judges were exempt from the pension overhaul, a move designed to avoid potential conflicts of interest as they weigh the various legal challenges.