Court Rejects Legal Challenge to Illinois Pension Consolidation
An Illinois Circuit Court judge has denied a lawsuit that sought to stop the consolidation of the state’s 650 firefighter and police officer pension funds, rejecting the plaintiff’s claims that a law enacting the move violated the state’s constitution.
In 2019, the Illinois General Assembly passed a bill that allows for the consolidation of 650 police and firefighter pensions in order to pool their funds into two statewide funds for investment purposes—one for police and one for firefighters. The move is intended to help improve the financial stability of the pension funds and ease pressure on local governments to raise taxes to fund those pensions.
However, in February 2021 18 police and firefighter pension funds, including active and retired members, filed a complaint against Illinois Governor J. B. Pritzker, who signed the bill into law. The lawsuit alleged that the consolidation violates two provisions of the Illinois Constitution: the pension protection clause and the takings clause.
The plaintiffs claimed that they had a contractual and enforceable right to exclusively manage and control their investment expenditures and income, including interest dividends, capital gains and other distributions on investments, which they said the consolidation infringed upon.
Although Judge Robert Villa writes in the ruling that the consolidation “undeniably diminished the weight of each individual’s board member vote,” he also holds that traditional voting rights claims are not at issue.
“The main distinction between the case at bar and the aforementioned cases,” Villa writes, “is that those cases involved traditional ‘voters rights’ 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.”
The ruling states that voting is not currently a benefit under the pension clause of the state constitution, pointing out that the courts “have yet to hold that the right to vote for pension fund board members falls within the protections of the Pension Clause.” It also rules that the takings clause claim can’t be tied to real property as required under Illinois law.
“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 writes in his decision. “Similarly, there is no evidence that those still employed will suffer a similar fate when they eventually retire.” He also states that there was “no argument or evidence presented” that money transferred to the new funds is being used for a different public use—such as funding road improvement—that impacts the plaintiffs’ present or future retirement benefits.
The Plaintiffs have 30 days to appeal the decision.
The Firefighters’ Pension Investment Fund applauded the court ruling, saying in a statement that it will continue to implement the transition process, which is required to be completed by June 30. The fund said that approximately 90% of local firefighter pension funds have successfully completed the transition process so far, and that it is working with the remaining funds to do the same. The fund said it has $6.9 billion in assets under management.
The Illinois Police Officers’ Pension Investment Fund said it completed its third tranche of asset transfers on May 2, and that to date 46 plans have transferred more than $1 billion worth of assets to the IPOPIF consolidated fund. It also said there are another 93 funds currently going through the process to transfer funds on either June 1 or June 24. It added that if all of the plans complete the transfer, there will be more than $4 billion in assets in the IPOPIF consolidated fund by the end of June.