January 14, 2015 / 12:05 AM / 5 years ago

Illinois gets support for quest to save pension reform law

CHICAGO, Jan 13 (Reuters) - Illinois is getting support from its biggest city, business leaders and legal experts in its quest to defend the constitutionality of a 2013 law aimed at easing the state’s huge public pension burden.

The city of Chicago, social service providers and professors specializing in constitutional and contract law were among the parties that filed nine so-called amicus briefs with the Illinois Supreme Court by a Monday deadline.

The briefs backed the state’s appeal of a Nov. 21 court ruling that found the 2013 law violated a provision in the Illinois Constitution preventing retirement benefits for public workers from being impaired or diminished.

Illinois has the worst-funded retirement system and lowest credit ratings among the 50 states. Its unfunded pension liability hit $104.6 billion at the end of fiscal 2014.

The state said its inability to use the law, which is opposed by labor unions and retiree groups, would prevent it from cutting pension costs and allow pension payments to consume an increasing amount of tax revenue over at least 15 years.

“That means at least one of every five dollars - and possibly as much as one of every four dollars - of tax revenue collected by the state will have to go to pension costs,” a brief filed by Illinois Attorney General Lisa Madigan said.

The reform law enacted in December 2013 reduces and suspends cost-of-living increases for pensions, raises retirement ages and limits salaries on which pensions are based.

The law was supposed to go into effect in June 2014 but was put on hold by a county court judge pending his ruling in five consolidated lawsuits.

Illinois says it is required to maintain its sovereignty by the U.S. Constitution and that its police powers allow it to reduce retirement benefits to deal with the state’s fiscal emergency. Those arguments were echoed in briefs filed on Monday by legal experts and business group the Civic Committee of the Commercial Club of Chicago. g

Chicago contended in its support brief that its efforts to rein in pension costs would be threatened if the court were to reject the state’s police powers argument.

The city, which is defending a 2014 law aimed at boosting funding for two of its four retirement systems from a union-backed constitutional challenge in Cook County Circuit Court, said it has a vital interest in the state’s case.

“Failure to achieve reform for the Chicago funds would have a devastating impact on Chicago’s economy and its delivery of essential services, as well as on the retirement security of current and former employees,” Chicago’s filing stated.

The Chicago Public Schools, the nation’s third largest school system, also backed the state’s position, as did Chicago’s transit authority and park district.

Six agencies providing services to disabled residents and others told the court that Illinois’ burgeoning pension payments are already crowding out funding for basic social services and the state has been chronically late in paying their bills.

“If the past is prologue, there will not even be scraps to pay for the social services of those most in need at the end of the day,” their brief said. (Reporting By Karen Pierog; editing by Andrew Hay)

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