BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
A Cook County, Illinois, circuit court judge ruled unconstitutional a pension reform law that took effect on Jan. 1 aimed at improving the funding of Chicago's pension funds for laborers and municipal workers.
Judge Rita A. Novak declared the reform unconstitutional Friday morning. The law, signed by then-Gov. Pat Quinn in June 2014, raised employee and employer contributions and reduced retiree cost-of-living adjustments for the $1.4 billion Chicago Municipal Employees' Annuity & Benefit Fund and $5.1 billion Chicago Laborers' Annuity & Benefit Fund.
In a statement on its website, the municipal fund said: “It is our expectation that a motion to stay the decision until such time that the Illinois Supreme Court can rule on the case will be filed. Once any such motion to stay is ruled upon by Judge Novak and/or the Illinois Supreme Court, MEABF will update our members.”
Standard & Poor's Ratings Services said in a news release, “We will likely lower our (general obligation) rating within the next six months if the city fails to incorporate pension contributions in a structurally balanced manner.”
In May, S&P lowered the rating of Chicago's general obligation credit to A- from A+, referencing an earlier decision by the Illinois Supreme Court declaring a state pension reform law unconstitutional.
The municipal workers' pension fund has just 42.1% of the assets it needs, with an unfunded liability of $7.13 billion, according to a July 20 financial report distributed to potential buyers of the city's most recent bond offering. The laborers' fund has 65.9% of the assets it needs, with an unfunded liability of $719 million.
The municipal workers' fund is projected to run out of money in 2026, with the laborers' becoming insolvent three years later.
As a result of Friday's ruling, the city won't have to pay an additional $94.9 million next year to the two funds. Under the law that has been struck down, the city's combined contribution would have increased 55%, to $266.7 million in 2016, from $171.8 million that would have been due under the old law.
Chicago Mayor Rahm Emanuel has given no indication what action he might take in response to the court ruling.
James Mohler, MEABF executive director, and Michael Walsh, Chicago Laborers' executive director and chief investment officer, did not immediately return phone calls seeking further comment.
Rob Kozlowski writes for Pensions & Investments, a sister publication of Business Insurance.
Greg Hinz of Crain's Chicago Business, a sister publication of Business Insurance contributed to this story.
(Reuters) — Chicago's $20 billion unfunded public pension liability is on track to grow significantly regardless of the outcomes of litigation over the constitutionality of benefit cuts or legislative action, Moody's Investors Service said on Friday.