On January 9, 2013, Representative Nekritz filed House Bill 98. H.B. 98 would amend the State pension systems. The bill was assigned to the House Personnel and Pensions Committee on January 30, 2013. Currently, H.B. 98 does not affect Downstate Fire or Police pension funds.
On January 13, 2013 House Speaker Michael Madigan sent a Letter to the President of the AFL-CIO and We Are One Coalition regarding pension reform. The letter rejects the call for a summit in Burr Ridge and requests that unions support current proposals for pension reform.
COGFA, the Illinois Commission on Government Forecasting and Accountability, issued its Report on the Condition of the Downstate Police and Fire Pension Funds in Illinois pursuant to requirements set forth in Public Act 96-1495. The report examines the 7 year period between fiscal years 2004 and fiscal years 2010. The report analyzes pension fund’s in four categories: (1) funds with less than $2.5 million in assets, (2) funds with between $2.5 million and $5 million in assets, (3) funds with between $5 million and $10 million in assets, and (4) funds with greater than $10 million in assets. Here are some highlights from the report:
– There are 642 downstate fire and police pension funds. There are 350 police pension funds and 292 fire pension funds.
– Combined unfunded liabilities increased from $953 million in FY 1991 to $7.579 billion in FY 2010.
– Average police pension funded ratios declined from 75.09% in FY 1991 to 54.29% in FY 2010. Average fire pension funded ratios declined from 76.40% in FY 1991 to 54.81% in FY 2010.
– In FY 2010 there were 9122 firefighter participants and 13230 police participants.
– The average retirement benefit for fire in FY 2010 was $49,600. The average retirement benefit for police in FY was $49,200. The average retirement benefit for fire and police in funds with less than $2.5 million in assets in FY 2010 was $32,800 and $33,500 respectively. Whereas, the average retirement benefit for fire and police in funds with greater than $10 million in assets in FY 2010 was $51,000 and $50,800 respectively.
– The largest police pension funds by accrued actuarial assets (in order) are Rockford, Peoria, Joliet, Aurora, Springfield, Naperville, Arlington Heights, Oak Lawn, Schaumburg, and Skokie.
– The largest fire pension funds by accrued actuarial assets (in order) are Rockford, Peoria, Aurora, Springfield, Naperville, Schaumburg, Joliet, Oak Lawn, Orland Fire Protection District, and Skokie.
– Attached to the report (beginning at page 29) is a chart for each pension fund showing changes in market value of assets, rate of return, actuarial value of assets, total actuarial liabilities, rate of funding, number of active members, number of retired members, and average retiree annuity.
On January 18, 2013 the Seventh Circuit Court of Appeals issued its opinion in Wisconsin Education Association Council, et al. v. Scott Walker et al. Act 10 applied to all public sector workers other than public safety employees. Act 10 limited Wisconsin public sector workers’ rights to collectively bargain only on the issue of base wages, imposed strict annual recertification requirements, and prohibited payroll deductions of Union dues. The District Court invalidated the recertification requirements and the prohibition on payroll deductions of Union dues. The Seventh Circuit reversed the District Court’s invalidation of the recertification requirements and the prohibition on payroll deductions and affirmed the District Court’s finding that the collective bargaining limit was constitutional. Therefore, the Seventh Circuit found Act 10 constitutional in its entirety.
On January 17, 2013 the Florida Supreme Court issued its opinion in Scott v. Williams effective upholding the Legislature’s 2011 pension reform laws. In a 4-3 decision, the Florida Supreme Court reversed a circuit court order which held that statutes requiring state employees to contribute 3% of their salary to the pension system and that eliminated COLAs for service earned after the challenged statutes’ effective date were unconstitutional. The Court rejected the argument that the challenged statutes breached the employees’ contract rights guaranteed by a 1974 preservation of rights statute. That preservation of rights statute provided that “…the right of members of the retirement system…are declared to be of a contractual nature, entered into between the member and the state, and such rights shall be legally enforceable as valid contract rights and shall not be abridged in any way.” The Court held that the preservation of rights statute was not intended to bind future legislatures from prospectively altering benefits for future service. The Court also held that the preservation of rights statute does not create binding contract rights for existing employees to future retirement benefits based upon the pension plan in place prior to the effective date of the challenged statutes. The Court then held that the 3% contribution and elimination of the COLA for service performed after the effective date of the statute constituted prospective changes and did not breach any contract right between the state and its employees.
Additionally, the Court rejected an argument that the challenged statutes, on their face, prohibited collective bargaining on issues of retirement in violation of the State Constitution. In so holding, the Court avoided having to decide whether the State may limit the right to collective bargain on retirement issues based on the principle of separation of powers and the Legislature’s exclusive control over public funds.
Although the Florida Supreme Court’s holding is not binding on Illinois’ Courts, its holding can be considered as persuasive authority.