Fred Klonsky’s Notes on Attorney John Fitzgerald’s Speech at the IRTA

“Fitzgerald pointed to four legal cases: Kanerva v. Weems, Heaton v. Quinn (Yes. THAT Quinn), Jones v. the Municipal Employees Annuity and Benefit Fund of Chicago and Matthews v. the Chicago Transit Authority.

“What were the significant legal conclusions of each as they concerned the pension protection clause, Article XIII, Section 5 of the Illinois Constitution which states that benefits are a contractual obligation that cannot be diminished or impaired?

“With Kanerva v. Weems, the court established the principle that protected benefits went beyond annuities and included such things as health insurance benefits.

“With Heaton v. Quinn the court confirmed that a crisis, particularly one created by the state, is not an excuse to violate the constitution. ‘It is a summons to defend it,’ wrote the court in its unanimous opinion.

“With Jones v. the MEABF of Chicago, the court said that it means nothing that a union gives political support to legislation reducing pension rights if that result does not result from collective bargaining and a vote of the members.

“In Matthews v. the CTA, the court wrote that constitutionally-protected benefit rights can be waived through collective bargaining but cannot be retroactively applied to those already retired.

“While the 1970 Constitution does protect pension benefits, it is less clear on how the benefits are to be funded. Fitzgerald explained that those at the convention discussed it, but they did not anticipate the degree to which the politicians of the state would allow the funding to be diverted. They believed that action would be taken before a system would go into default.

“But what constitutes default? Fitzgerald pointed to the case of the City of Harvey and the Harvey Firefighters Pension Fund. In that case, the pension fund was only 27% funded, and actuaries anticipated it would go belly up within five years.

“An appellate court judge ruled in summary judgment that this constituted impending default and ordered the City of Harvey to implement a time-line levy to make the pension system whole.

“Some have wondered what might happen if the state pension funds were to go into default. Fitzgerald believes the Harvey Fire-fighters’ case gives us some clues.

“In that case the judge found that there is a legal threshold for what constitutes default. In spite of what Governor Rauner has suggested, Congress cannot amend the state constitution and eliminate the pension protection clause. The pension debt must be paid. The legislature can do it. If it refuses to act on their legal and moral obligation, a court can and will order it done.

“To those who have threatened state bankruptcy, as happened with the City of Detroit, Fitzgerald argued that bankruptcy cannot be applied to just one debt, like the pension debt. Bankruptcy is applied to all debts. And states cannot file bankruptcy anyway as long as they have the power to raise revenue.

“These were my notes. I am not an attorney. If I did not represent John Fitzgerald’s presentation with perfect accuracy, I apologize. That’s why they make the big bucks”—Fred Klonsky. 

Commentary:

2014   Kanerva v. Weems (July 3):

The Pension Protection Clause makes it “clear that if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired… [The State of Illinois or anyone else] may not rewrite the Pension Protection Clause to include restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve... [P]ension benefits are insulated from diminishment or impairment by the General Assembly…” (Kanerva v. Weems, 2014 IL 115811).

“…Under Kanerva, it is clear that the Illinois Constitution protects pension and retirement benefits from the diminishments and impairments that the Act imposes, and that the plaintiffs are entitled to their benefits without any diminishment or impairment from the respective State retirement systems. The very purpose of the Pension Protection Clause was to constitutionally guarantee the payment of pension and retirement benefits, to remove from the General Assembly the power to impair or diminish those pension benefits, and to eliminate the very argument that the defendants raise by their affirmative defense. There can be no ‘reserved sovereign power’ to do something that the Illinois Constitution expressly prohibits…” (from Update for Pension Lawsuit: Motion Filed Today, August 21st, in the Circuit Court for the Seventh Judicial Circuit in Sangamon County, Illinois).

“Applying this constitutional rule, our courts have repeatedly invalidated amendments to the Illinois Pension Code that would change the calculation of a pension system member’s pensionable salary so as to diminish that member’s pension benefits. In Heaton, the Illinois Supreme Court invalidated legislation which, among other things, ‘cap[ped] the maximum salary that may be considered when calculating the amount of a member’s retirement annuity.’ Heaton 2015 IL 118585, ¶ 27 (describing P.A. 98-0599) (Lawyer and Lobbyist Eric M. Madiar Believes Cullerton's Senate Bill Is Permissible/Lawyers Gino L. DiVito and John M. Fitzgerald Disagree).

  

2015   MARY J. JONES et al., Appellees, v. MUNICIPAL EMPLOYEES’ ANNUITY & BENEFIT FUND OF CHICAGO et al., Appellants (March 24):

“…In this case, it is undisputed that the unions were not acting as authorized agents within a collective bargaining process. Thus, we need not resolve whether the vote taken by union representatives as expressed in the Brandon affidavit bound members of the Funds in a collective bargaining process. Rather, we agree with the trial court that ‘these negotiations were no different than legislative advocacy on behalf of any interest group supporting collective interests to a lawmaking body.’ The individual members of the Funds have done nothing that could be said to have unequivocally assented to the new terms or to have ‘bargained away’ their constitutional rights. Accordingly, nothing in the legislative process that led to the enactment of the Act constituted a waiver of the Funds members’ constitutional rights under the pension protection clause… The judgment of the circuit court declaring Public Act 98-641 to be unconstitutional and permanently enjoining its enforcement is affirmed.”

“[Furthermore, consider that] in the context of the collective bargaining process for public employees, employees designate a particular union as their exclusive agent for collective bargaining negotiations. See 5 ILCS 315/6 (West 2014). The cases that defendants rely upon to support a bargained-for exchange argument involved agreements reached through the collective bargaining process. See Ballentine v. Koch, 674 N.E.2d 292, 296 (N.Y. Ct. App. 1996) (“[B]ecause plaintiffs designated the PBA as their agent for the collective bargaining negotiations at issue here and were thus bound by its actions taken on their behalf during the negotiation process [citation], the PBA’s waiver of the constitutional protections of [New York’s pension protection clause] is valid as to plaintiffs ***.”); Schacht v. City of New York, 346 N.E.2d 518, 519 (N.Y. Ct. App. 1976) (“Plaintiff, having designated the union to be her agent for collective bargaining purposes, is bound by agreements made by that union on her behalf”)…” (Jones v. Municipal Employees' Annuity and Benefit Fund, Circuit Court). The Illinois Supreme Court affirmed the decision on March 24, 2016: (Jones v. Municipal Employees' Annuity &Benefit Fund, 2016 IL 119618).

2015   Doris Heaton, et al. v. Pat Quinn, in his capacity as Governor of the State of Illinois, et al. (May 8):

“…The concerns of the delegates who drafted article XIII, section 5, and the citizens who ratified it have proven to be well founded. Even with the protections of that provision, the General Assembly has repeatedly attempted to find ways to circumvent its clear and unambiguous prohibition against the diminishment or impairment of the benefits of membership in public retirement systems. Public Act 98-599 is merely the latest assault in this ongoing political battle against public pension rights. As we noted earlier, through that legislation the General Assembly is attempting to do once again exactly what the people of Illinois, through article XIII, section 5, said it has no authority to do and must not do… The judgment of the circuit court declaring Public Act 98-599 to be unconstitutional and permanently enjoining its enforcement is affirmed” (Heaton v. Quinn, 2015 IL 118585).

“…As the Illinois Supreme Court has explained, ‘once an individual begins work and becomes a member of a public retirement system, any subsequent changes to the Pension Code that would diminish the benefits conferred by membership in the retirement system cannot be applied to that individual.’ In re Pension Reform Litigation (Heaton v. Quinn), 2015 IL 118585, ¶ 46; see also Kanerva v. Weems, 2014 IL 115811, ¶ 38; Jones v. Municipal Employees’ Annuity & Benefit Fund of Chicago, 2016 IL 119618, ¶¶ 36-47. 

2016  JERRY MATTHEWS et al., Appellees and Cross-Appellants, v. CHICAGO TRANSIT AUTHORITY et al. (Retirement Plan for Chicago Transit Authority Employees et al., Appellants and Cross-Appellees) (May 5):

“…[A] contract right becomes vested when the employee has fulfilled all of the necessary qualifications and obligations for enjoyment of the right, [as in the case of retirees]. Lawrence, 152 Ill. App. 3d at 197-98 (quoting Kulins, 121 Ill. App. 3d at 525-27); see also Navlet v. Port of Seattle, 194 P.3d 221, 237 (Wash. 2008) (en banc)… Where all of the requisite specifications for the present or future enjoyment of a right have been achieved, the right is considered to be vested…” Black’s Law Dictionary 1699 (9th ed. 2009). (qtd. in Matthews v. CTA, 2016 IL 117638).

Can the Unions and the Illinois General Assembly Bargain Away Constitutionally-Guaranteed Benefits through Consideration for Retirees? The answer is unequivocally NO regarding retirees. Retirees are not part of the collective bargaining process, only active employees are. However, some people believe that the Illinois Supreme Court had suggested that a consideration supported by collective bargaining for current employees is a possibility (Matthews v. Chicago Transit Authority, 2016 IL 117638). 

Some people believe that a legitimate consideration means not diminishing an already existing constitutionally-guaranteed benefit. I am one of those people; however, my strongest beliefs have always been based upon moral perspectives reinforced by the most current legal analyses.

-Glen Brown