Teachers Attack Illinois Pension Reform Law

     CHICAGO (CN) - Public schoolteachers filed the first class action challenging Illinois' pension reform law, claiming the state's Dec. 5 fix of its massively underfunded pension system violates the Illinois Constitution.
     Lead plaintiff Doris Heaton sued Gov. Pat Quinn, Comptroller Judy Baar Topinka, and the state Board of Trustees of the Teachers' Retirement System in Cook County Chancery Court, on behalf of working and retired public teachers.
     They challenge the bill the Legislature passed on Dec. 5, to try to patch up a $100 billion deficit in the state pension system.
     "That legislation was known as Senate Bill 1 and now is Public Act 98-0599," the complaint states. "It is not true reform. It is an unapologetic violation of the Pension Protection Clause of the Illinois Constitution. Public Act 98-0599 directly diminishes and impairs the benefits of membership in a retirement system of the state."
     The law reduces cost-of-living increases for pensioners, gradually raises the retirement age for employees, and caps their "pensionable salary."
     The state Senate approved the bill by 30-24 vote and the House by 62-53.
     House Speaker Michael Madigan claimed the bill will save the state $160 billion over 30 years. This year, the state devoted 22 percent of its general revenue fund to public employee pension.
     But the Illinois constitution protects state pensions from cuts, the teachers say.
     "When teachers and school administrators decided to continue educating Illinois children instead of transitioning to careers in the private sector or working elsewhere, when they decided where to send their children to college, and when they decided when and how to retire, they relied upon that guarantee," the lawsuit states. "Many of them can recite that constitutional guarantee by heart. Its words are clear and simple:
     "'Membership in any pension or retirement system of the state, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired,'" the complaint states, quoting the Illinois Constitution.
     The teachers also cite the ruling of the Illinois Supreme Court in Jorgensen v. Blagojevich, 211 Ill. 2d 286, 316 (2004): "No principle of law permits us to suspend constitutional requirements for economic reasons, no matter how compelling those reasons may seem."
     But that's what the state did, the teachers say: "Many thousands of livelihoods depend on consistent enforcement of the pension protection clause. Countless careers, retirements, personal investments, and medical treatments have been planned in justifiable reliance not only on the promises that were made in collective bargaining agreements, employment agreements and the Illinois pension code, but also on the guarantee of the pension protection clause," the complaint states.
     Illinois teachers contribute 9.4 percent of their salaries to the retirement system, from which they receive benefits in lieu of Social Security payments.
     The median pay for a first-year teacher in Illinois was $35,913 for the 2011-2012 school year, according to " Illinois Teacher Salary Study , 2011-2012," by the State Board of Education. The lowest first-year pay that year was $25,470, and the highest was $55,091, according to the report.
     All Illinois employees accrue 1.67 percent of their final average salary each year they work for the state, and their benefits are capped at 75 percent of their final average salary.
     In 1970, the state's unfunded pension liabilities were about $2.5 billion, according to the complaint. Lawmakers let it ride.
     The teachers want the law enjoined as unconstitutional. They say it will affect nearly 500,000 working and retired teachers.
     They are represented by Gino DiVito with Tabet DiVito & Rothstein.