(Reuters) — A coalition of public worker labor unions filed a lawsuit on Tuesday seeking to overturn a new Illinois law aimed at reducing a $100 billion unfunded pension liability.
The class-action lawsuit, filed by the We Are One Illinois coalition in Sangamon County, Ill., Circuit Court in the state capital of Springfield, claims the law violates the Illinois Constitution, which stipulates that public worker pensions are contracts that the state cannot diminish or impair.
The law, which was enacted in December but does not take effect until June, reduces and suspends cost-of-living increases for pensions, raises retirement ages and limits the salaries on which pensions are based.
The unions' lawsuit comes a day before Democratic Illinois Gov. Pat Quinn gives his state of the state address, in which he is expected to highlight progress on tackling a pension funding problem that helped drop Illinois' credit ratings to the lowest levels among states. The litigation also comes ahead of a $1 billion general obligation bond sale the state has scheduled for Feb. 6.
Illinois teachers, school administrators and retirees have already filed three class-action lawsuits in Sangamon and Cook County, Ill., courts against the law. All of the lawsuits may be consolidated, according to a legal source.
Gov. Quinn, who is named in the unions' lawsuit along with the Illinois comptroller, treasurer and three state retirement systems affected by the law, was not surprised by the lawsuits, but believes the law's constitutionality will be upheld, according to a statement from his office.
The reforms are expected to save the state nearly $145 billion over 30 years, according to the latest estimates from Gov. Quinn's office. Illinois has had the worst-funded pension system among the states after decades of skipping or skimping on pension payments.
The law offers workers and retirees some sweeteners, including a reduction in contributions toward pensions and a method for ensuring the state fully makes its contributions.
In anticipation of a legal fight, the pension reform law includes a preamble that concludes Illinois' fiscal problems could not be solved without changes to the retirement system structure.
We Are One Illinois includes the Illinois AFL-CIO, Illinois Federation of Teachers, Illinois Education Association, American Federation of State, County and Municipal Employees Council 31 and other unions.