Illinois Supreme Court allows continued consolidation of downstate fire, police pensions

The Illinois Supreme Court upheld the constitutionality of a state law permitting the consolidation of police and fire pension funds.

The unanimous decision by the state's highest court affirmed a lower court ruling, finding that retired police and firefighters did not lose voting power or be bereft from their guaranteed monthly benefits as a result of the consolidation.

Gov. JB Pritzker signed the law, receiving bipartisan support, in 2019 following decades of negotiations. Friday's ruling was a "victory for Illinois taxpayers, local governments and first responders,” he said.

"We ushered in a new era of responsible fiscal management, one aspect of which has been consolidating over 600 local pension systems to increase returns and lower fees, reducing the burden on taxpayers and keeping another campaign promise," Pritzker said in a statement.

More: Pritzker signs pension consolidation bill

All told, the law consolidated 649 downstate and suburban police and fire pension funds into two separate funds — Illinois Police Officers’ Pension Investment Fund and the Firefighters Pension Investment Fund. According to the most recent data, FPIP was holding $7.5 billion in investment assets while IPOPIF had $9.1 billion.

"I am delighted to report that the Illinois Supreme Court affirmed the judgment of the lower courts," said William R. Atwood, FPIP executive director, said in a statement. "The opinion was short, unambiguous, and unanimous."

Supporters of the law such as the Illinois Municipal League said it would produce higher investment yields while cutting administrative costs.

Still, nearly three dozen pensioners and 17 of the individual pension funds sued over the law.  They argued they were wronged because members now vote for the funds’ oversight boards on a statewide basis, rather than selecting five of their peers for their local boards as they used to.

Attorney Daniel Konicek, who represented the plaintiffs in oral arguments to the high court in November, said his clients’ votes were “completely, undeniably diluted,” which he contended violated the state constitution’s “pension protection clause.” That provision, which the Supreme Court has consistently ruled is ironclad, states membership in any government retirement system constitutes “an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

But all seven justices on the Illinois Supreme Court rejected Konicek’s argument. Writing for her colleagues, Chief Justice Mary Jane Theis cut down Konicek’s assertion that this case was similar to a 2014 case in which the court ruled the pension protection clause prevented the state from reducing health care benefits to retirees.

“In contrast, the ability to vote in elections for local pension board members is not such a constitutionally protected benefit, nor is the ability to have local board members control and invest pension funds,” Theis wrote.

The state is attempting to eat into its public pension debt, investing an additional $200 million above what is required in this year's budget. Still, the issue of unfunded pension liabilities persists in the five public pension funds: State Employees' Retirement System, State Universities Retirement System, Judges' Retirement System, General Assembly Retirement System, and Teachers' Retirement System.

The Commission on Government Forecasting & Accountability, an agency providing fiscal trends to the Illinois General Assembly, reported unfunded pension liabilities totaling $141.1 billion as of June 30, 2023.

Reporter Hannah Meisel of Capitol News Illinois contributed to this report.

Contact Patrick M. Keck: 312-549-9340, pkeck@gannett.com, twitter.com/@pkeckreporter.

This article originally appeared on State Journal-Register: State high court reapproves police, fire pension consolidation