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Chair

County Building

Legislation and
Intergovernmental Relations
Committee
Rules and Administration
Committee

118 N. Clark Street


Room 567
Chicago, IL 60602
(312) 603-6383 (t)
(312) 603-3622 (f)
larrv.suffredin@cookcountvil.gov
www.suffredin.org

District Office
820 Davis St., Ste. 104
Evanston, IL 60201
(847) 864-1209
(847) 864-1445 (f)

Member

Larry Suffredin
Commissioner - 131h District
Cook County Board of Commissioners

MEMORANDUM
To:

Criminal Justice Committee


Finance Committee
Litigation Sub-Committee
Health and Hospitals Committee
Homeland Security and
Emergency Management
Committee
Human Relations Committee
Pensions Subcommittee
Roads & Bridges Committee
Veterans Committee
Workforce, Job Development
and Training Committee
Zoning and Building
Committee

Cook County Commissioners and President Preckwinkle

From: Commissioner Larry Suffredin, Chairman of the Legislation and


Intergovernmental Relations Committee
Date: May 22,2015
Re:

House Amendment 1 to SB 843-Cook County Pension Amendments

Attached please find an opinion I requested from the Cook County State's Attorney
regarding significant pension legislation affecting Cook County.

Thank you

The 131h District includes the following communities


49th & 50th Wards of the City of Chicago, the City of Evanston and the Villages of Glencoe, Glenview, Kenilworth,
Lincolnwood, Morton Grove, Niles, Northbrook, Skokie, Wilmette, and Winnetka

Printed on Recycled Paper

r---

OFFICE OF THE STATE'S ATTORNEY


COOK COUNTY, ILLINOIS

ANITA ALVAREZ

CIVIL ACTIONS BUREAU

STATE'S ADORNEY

500 RICHARD J. DALEY CENTER


CHICAGO, ILLINOIS 60602
AREA 312-603-5440

May 21,2015

Honorable Larry Suffredin


Commissioner- 13th District
Cook County Board of Commissioners
County Building -Room 567
118 North Clark Street
Chicago, Illinois 60602

CONFIDENTIAL ATTORNEY CLIENT COMMUNICATION


In Re: House Amendment 1 to SB843- Cook County Pension Amendments
Dear Commissioner Suffredin:

Issue Presented
You have asked this office to advise you concerning the constitutionality of proposed
amendments to the annuity and benefit funds for Cook County and Cook County Forest Preserve
employees, found in Articles 9 and 10, respectively, of the Illinois Pension Code, 40 ILCS 5/9101 et seq. These amendments are contained in legislation pending as House Amendment 1 to
Senate Bill 843 (the "County Plan"). Specifically, you have asked if these provisions are
constitutional in light of the recent Illinois Supreme Court decision in In re Pension Reform
Litigation, 2015 IL 118585 (2015)("Pension Reform Litigation").

Conclusion
To the extent that the proposed legislation unilaterally imposes changes upon existing
pension annuity benefits, which changes serve to diminish and impair such existing benefits, the
legislation violates article XIII, section 5 of the Illinois Constitution of 1970 (the "Pension
Protection Clause") and, thus, is unconstitutional.

Discussion
A.

The Pension Protection Clause

The Pension Protection Clause provides that

Membership in any pension or retirement system of the State, any unit of local
government or school district, or any agency or instrumentality thereof, shall be
an enforceable contractual relationship, the benefits of which shall not be
diminished or impaired.
Ill. Const. 1970, article XIII, section 5. The Illinois Supreme Court has had occasion to interpret
this provision twice in the past year, first in Kanerva v. Weems, 2014 IL 115811 (2014), and
more recently in the Pension Reform Litigation. In both cases, the Illinois Supreme Court held
quite definitively that the Pension Protection Clause was intended to, and in fact accomplishes,
two things: (1) it first mandates a contractual relationship between the governmental employer
and its employees; and (2) it then mandates that the General Assembly may not impair or
diminish any of the employees' contractual rights. Kanerva, 2014 IL 115811 at ~46; Pension
Reform Litigation, 2015 IL 118585 at~ 15.
Retirement annuity benefits are unquestionably a "benefit of [the] contractuallyenforceable relationship resulting from membership" in [an Illinois government
employee retirement system]. Indeed, they are among the most important benefits
provided by those systems.

Pension Reform Litigation

at~

47.

The Supreme Court noted that the reaso:n for the two portions of the Pension Protection
Clause was to "eliminate any uncertainty as to whether ... local governments were obligated to
pay pension benefits .... " !d. at~ 16. Once this Clause settled that uncertainty, the "'politically
sensitive area' of how the benefits would be financed was a matter left to the other branches of
government to be worked out." !d. The Court then added an important qualifier: in the event
that a public body showed an unwillingness to meet its funding obligations, the Court did not
"foreclose the possibility that a direct action could be brought by pension system members to
compel funding if a pension fund were on the verge of default or imminent
bankruptcy." Pension Reform Litigation, 2015 IL 118585, ~16, n. 3, citing People ex rei.
Sklodowski v. State, 182 Ill. 2d 220 (1998).

B.

The County Plan Diminishes and Impairs Existing Pension Benefits

The legislation struck down in the Pension Reform Litigation is similar to the County
Plan, at least with respect to the impact of the legislation upon members' annuity benefits. For
example, both plans:
Establish a cap upon the maximum salary that can be considered for annuity
calculation purposes;
Increase the retirement age; and
Change the mechanism for calculating the annual increases in retirement
annuities, to the detriment of plan members, such that for some years, including
2016, annuitants will receive no COLA.

The County Plan further diminishes the annuity rights of members by terminating the use
of higher salaries earned in other retirement systems, changing the benefits available to elected
county officers, requiring additional employee contributions, and increasing the amount of the
retiree's payment should he or she seek service credit for unused sick days. The County Plan
therefore diminishes and impairs existing retirement annuity benefits pursuant to the explicit
holding in the Pension Reform Litigation.
C. The County Plan Is An Unconstitutional Attempt to Unilaterally Change the
Terms of the Existing Contractual Relationship with County Plan Members
The County Plan seeks to avoid application of the Pension Protection Clause by asserting
that plan members would receive consideration to offset any diminishment or impairment of
their existing benefits. The County Plan identifies the following as the consideration being
offered:
a. A financially solvent plan;
b. The possibility of higher cost of living (COLA) increases during times of
high inflation;
c. The creation of a health care trust to assist in the payment of retiree health
care costs;
d. The County's assumption of actuarial responsibility for the funding of the
plan;
e. Decreased contributions and increased cost of living benefits in the event
the Plan ever reaches a 100% funding level (no earlier than 2043).
House Am. 1 to SB 843 at sec. 50(17), (19). There are fatal flaws in this reasoning, however.
In order to modify the terms of an existing contract, Illinois law requires valuable consideration
to be exchanged between the parties. Doyle v. Holy Cross Hospital, 186 Ill. 2d 104, 112 (1999).
Valuable consideration includes "some right, interest, profit or benefit accruing to one party, or
some forbearance, detriment, loss of responsibility given, suffered or undertaken by the other."
White v. Village of Homewood, 256 Ill. App. 3d 354, 356-57 (1st Dist. 1993). Consideration is
defined as a "bargained-for exchange of promises or performance." Tower Investors, LLC v. 111
East Chestnut Consultants, Inc., 371 Ill. App. 3d 1019, 1027 (1 51 Dist. 2007).
Where one party does what it is already legally obligated to do, that is not valuable
consideration. White, 256 Ill. App. 3d at 357. Further, Illinois courts have held that "mere
continued employment, standing alone, does not constitute consideration supporting the
unilateral modification of an existing employment contract." Ross v. May Co., 377 Ill. App. 3d
387, 392 (1st Dist. 2007)
The County Plan seeks to assert that plan members will receive the benefit of a
financially solvent plan, one for which the County will assume full actuarial responsibility for

funding. However, as outlined in the Pension Reform Litigation, full funding of their annuity
benefits is a contractual right already held by all plan members (to the extent that the Supreme
Court referenced the possibility that plan members might have the ability to legally compel
funding of any plan that becomes close to insolvent). An agreement to provide a benefit to
which members are already entitled cannot be deemed consideration to satisfy a contractual
amendment.
There is no question that the possibility, no matter how slight, of higher COLA increases
and decreased contributions upon the achievement of certain benchmarks might be adequate
consideration to uphold a valid contractual agreement. Likewise, to the extent that plan members
do not already have a right to receive any set amount of health care funding from the County, the
creation of a health care trust for such purpose could also support a bargained for contractual
amendment. However, the County Plan is not formulated as an offer of amendment, to be
accepted or rejected by plan members. Nor is it a bargained-for exchange of promises. It is,
rather, a unilateral imposition of changed terms, many of which diminish and impair existing
retirement annuity benefits. Simply put, there is no meeting of the minds and no modified
contract. See Siegel Development, LLC v. Peak Construction LLC, 2013 IL App (1st) 111973,
,;1 00 (1st Dist. 2013) (recognizing that without a meeting of the minds, there can be no contract).
There can be no question that this violates the Pension Protection Clause.
In Kraus v. Bd. of Trustees of Police Pension Fund of Niles, 72 Ill. App. 3d 833, 834-35
(1st Dist. 1979), the Illinois Appellate Court noted that the contractual relationship established at
the onset of an employee's entry into a retirement system is "governed by the actual terms of the
contract or pension," and illustrated the point by noting that an employee could agree to accept a
cost of living increase on the condition that it will not be regarded as salary for pension purposes.
!d. The critical factor in this analysis, however, is that it required the employee's agreement.
The County Plan attempts to skip this step, and instead unilaterally imposes changes on plan
members whether they agree or not. This aspect of the County Plan prevents it from being a
constitutional, bargained for amendment to the terms of the already existing contract between
plan members and their employer. Instead, it is an unconstitutional violation of the Pension
Protection Clause.
If this Office can be of further assistance to you in this matter, please contact us.
Very truly yours,

Daniel F. Gallagher
Deputy State's Attorney
Chief, Civil Actions Bureau

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