A Message to Mayor Rahm Emanuel: “Pension benefits cannot be netted against funding schemes…”

“Cook County Court Judge Rita Novak on Friday [July 24] overturned the city reforms to the cheers of retired city employees who’ve been paying more and receiving less since Jan. 1… Emanuel had argued that the Chicago pension reforms were fundamentally different than the state reforms imposed ‘arbitrarily.’ 

“His corporation counsel Stephen Patton further claimed that, rather than ‘diminish or impair’ the two funds, the city has made a commitment to ‘preserve and protect’ them that amounts to a ‘massive net benefit.’ Novak concluded that the ‘net benefit’ theory ‘does not survive scrutiny’ because it’s based on ‘several premises that are wholly inconsistent with constitutional teachings.’

“‘Pension benefits cannot be netted against funding schemes, regardless of any salutary outcomes they may have. To do so would render the rights guaranteed by the pension protection clause illusory. Such a result is contrary to the pension protection clause, its purpose and the Supreme Court’s interpretations of it,’ Novak wrote.

“‘It disregards the settled distinction between pension benefits, which are constitutionally protected, and funding choices, which are not . . . It fails to account for the fact that each of the ‘benefits’ that are ‘netted’ against the constitutionally protected right to pension benefits are subject to change at any time . . . The General Assembly is not free to diminish benefits even if offering increased financial stability.’

“Novak also shot down the city’s claim that 28 of 31 unions agreed to the changes. ‘The contention that labor unions, undisputedly acting outside the sphere of collective bargaining, may bind all members of the funds ignores the individual constitutional rights’ of retirees,’ she wrote.

“‘There is no evidence that, in reaching an agreement with the city, the union officials followed union rules and bylaws in such a way as to bind their members as true agents. Nor is there evidence that the membership voted on the agreement . . . Additionally, there is no showing that the unions could have acted as agents of retired members while at the same time acting as representatives of active employees.’

“Patton said he’s ‘disappointed’ by Friday’s ruling but has ‘always recognized’ that the Illinois Supreme Court will be the ultimate arbiter. His statement makes no mention of the fact that the state’s highest court has overturned state pension reforms on similar grounds.

“‘We now look forward to having our arguments heard there. We continue to strongly believe that the city’s pension reform legislation, unlike the state legislation held unconstitutional this past spring, does not diminish or impair pension benefits but rather preserves and protects them,’ Patton said in an emailed statement…” 

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Commentary: 

Remembering "The contention [when] labor unions, undisputedly act[ed] outside the sphere of collective bargaining... [and] ignore[d] the individual constitutional rights’ of retirees":

SB 2404 was an attempt to circumvent the “Pension Clause” by giving retirees and public employees a “choice” or “new consideration” to impair their own contract for a precarious state guarantee. According to John Stevens, Legal Consultant for the “We Are One” Labor Coalition: “To take away the Cost-of-Living Adjustment [COLA] for [current and future] retirees is not a free and fair choice.” Nevertheless, We Are One went ahead with the proposed bill.

…Modification of the “Pension Clause” would have been seen as a “result of a violation of fair dealing,” as an accommodation for “only” some members of the Illinois General Assembly who continuously steal money from the public pension systems and are, thus, “avoiding a pre-existing duty rule” (Professor of Law, Emeritus, Claude D. Rohwer and Professor of Law, Emeritus, Anthony M. Skrocki, Contracts in a Nutshell).

According to National University of Singapore Professor Mindy Chen-Wishart, “The consideration doctrine is a moving target… Different [understandings] yield different [interpretations]… Each conception can be contradicted by another… Courts have considerable latitude in determining whether to find consideration (or not), and hence whether to enforce a promise (or not)… A contract supported by consideration can still be set aside for… misrepresentation, duress, or undue influence or its contents may be supplemented by implied terms or [be] partially invalidated because of unfairness. In these cases, the presence of serious inadequacy of consideration will usually be the major, although not the sole, factor… It would be highly undesirable to allow public officials to extract benefits in return for the performance of their existing legal duties” (Contract Law).

Thousands of retirees would have been deprived of a contractually-guaranteed benefit that was earned at that time. These retirees were not represented at the table when Cullerton and the We Are One Coalition made their agreement. They were simply excluded from the process that affects them. The We Are One Coalition does not represent all retirees, especially non-members…

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