Lawsuits challenging Chicago’s 2014 overhauls of two pension funds could be heard by the state Supreme Court by early fall.
CHICAGO - Lawsuits challenging the 2014 overhauls of two Chicago city pension funds could be resolved on the lower court level by mid-summer and heard by the state Supreme Court by early fall.
That's under an ambitious schedule laid out by city and union attorneys Wednesday at a hearing on a pair of lawsuits challenging the city's pension reforms to its municipal employee and laborers' pension funds, which took effect on Jan. 1.
Under the schedule, all filings on the lawsuits are due by July 2 with a hearing set for July 9.
A ruling from Cook County Circuit Court Judge Rita Novak could come any time after that.
The schedule was hammered out during a Wednesday morning hearing in downtown Chicago crowded with teams of attorneys representing the city, retirees, unions and individual union members who filed the lawsuits last December. Several city retirees and union members attended the hearing.
Time is the enemy, Chicago Corporation Counsel Stephen Patton told the judge.
"Prolonging a decision can be extraordinarily harmful to the city," said Patton. "We've had two downgrades since we were last in front of you; exactly what we feared would happen. Given the financial circumstances of the city right now, the sooner we know the better."
Richard Prendergast, the city's lead attorney, said the clock is also ticking because Chicago is negotiating with various banks after the downgrades - the most recent of which came Monday from Moody's Investors Service, dropping the city into junk territory and triggering up to $2.2 billion of accelerated payments if banks demand them, according to Moody's.
"There are time-sensitive things such as the bond ratings we are also negotiating with banks and so we've got a lot of things going on," Prendergast said.
It was the first hearing in the case since February, when Novak agreed to stay the case until the state Supreme Court ruled on Illinois' own pension reforms.
In that decision, which came down last week, the court ruled that pension benefits are protected by the state constitution.
The plaintiffs challenging Chicago's reforms argue that the Supreme Court's Illinois ruling clearly paves the way for their own victory.
The city, however, believes its central argument - that the reforms are saving pensions that otherwise would not be paid at all - will withstand the constitutional challenge.
"It's a straightforward issue," Patton said. "We want to be heard on it and we think it's a winner."
The city also argues that it reached the reform in negotiations with the majority of city unions in contrast to the state government, which acted unilaterally.
"You can't negotiate away these constitutional rights," said Michael Freeborn, from Freeborn & Peters LLP, representing a coalition of union members, after the hearing. "The city can't brag about saving pensions while diminishing them at the same time."
"The downgrades are not the fault of the court; the downgrades are not the fault of the plaintiffs," Freeborn said. "They are the fault of leaders who made promises and didn't keep them."
All sides agree that the case will end up in the state Supreme Court no matter who wins.
"All of us are cognizant that I will rule in accordance with my reading of the law and facts presented to me and then it's going to go to the Supreme Court for a final decision," Novak said. "We can be assured it's going to be appealed no matter who prevails."
The city wants the top court to hear the case in September, or November at the latest, according to Patton.
The city's reform requires higher city and employee contributions and some benefit cuts, including a reduction in existing annual cost-of-living increases. The reform imposed a five-year ramp up period in contributions to 2020, with city contributions growing to reach an actuarially required contribution level that puts the funds on course to a 90% funded ratio in 40 years. Contribution levels were previously set in statute and often fall short of actuarially required levels.
