SPRINGFIELD, Illinois – The Illinois Supreme Court has upheld a law that consolidated hundreds of suburban and downstate police and firefighter pension funds in a unanimous decision. The court rejected the argument that the new law violated the state constitution’s pension protection clause by diluting the participants’ role in electing representatives to make investment decisions.
The law, signed by Gov. J.B. Pritzker in 2019, aimed to bring greater financial stability to the roughly 650 local funds serving communities outside Chicago and provide property tax relief. However, a group of 18 pension funds and dozens of active police and firefighters and retirees challenged the law, claiming it violated the state constitution’s guarantee that public employee pension benefits “shall not be diminished or impaired.”
The consolidation changed the allocation of decision-making power over investment decisions, transferring it to managers for the two statewide funds. This shift led to concerns about the impact on the voting rights of police officers and firefighters, which the plaintiffs argued was a violation of their constitutional protections.
In their filing to the Supreme Court, the state argued that the constitutional pension protections only extend to payments promised to participants in the retirement systems, not to changes to state law that affect their funding level. The court ultimately sided with the state, ruling that the law had no impact on the plaintiffs receiving their promised monetary benefits.
Despite the hopes that the consolidation would lead to lower property tax bills, the actual impact remains uncertain. Gov. Pritzker hailed the ruling as a victory for Illinois taxpayers, local governments, and first responders, emphasizing the law’s aim to increase returns, lower fees, and reduce the burden on taxpayers.
The decision was also lauded by the Illinois Municipal League, which represents local governments across the state. However, the pension fund participants who challenged the law expressed disappointment with the court’s decision. This ruling marks a significant development in the ongoing efforts to address the underfunded public pensions in Illinois, a problem that has stemmed from a variety of factors over the years.
The consolidation law aimed to address the low funding levels for the police and fire pension funds, which have been plagued by inaccurate actuarial assumptions, poor market performance, inadequate contributions from municipal governments, and benefit enhancements approved by the General Assembly. Despite these challenges, the funding level had improved even before the consolidation took full effect last year, indicating progress in addressing the state’s pension fund liabilities.