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Illinois Pension Fix Halted While Unions Pursue Challenge

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May 15 (Bloomberg) -- Illinois government workers won a temporary halt to a 2013 law passed to fix the state’s $100 billion pension shortfall while they fight it in court.

The law would reduce cost-of-living adjustments and raise the retirement age for workers who are now 45 or younger. The unions have sued Illinois Governor Pat Quinn, a Democrat, and other officials, contending the reductions are barred by the state’s constitution.

Circuit Court Judge John Belz in Springfield, the state capital, yesterday stopped the scheduled June 1 implementation of the law pending a final decision on whether the benefit cuts in the measure are permissible.

Illinois has the most underfunded pension system in the nation and led U.S. states in losing ground every year from 2007 to 2012 in socking away enough assets to pay retired workers. It was the most-populous of five states, including Kentucky, North Dakota, Oregon and Vermont, where pension-funding ratios fell at least 21 percentage points during those years, according to data compiled by Bloomberg.

Belz’s order will hurt taxpayers, Natalie Bauer, a spokeswoman for Illinois’ Democratic attorney general, Lisa Madigan, said in a statement.

“The goal of the pension reform law is to stabilize the pension systems,” she said. “Unfortunately, this decision will likely further burden the systems.”

The halt is “an important first step in our efforts to overturn this unfair, unconstitutional law and protect retirement security,” Michael T. Carrigan, president of the Illinois AFL-CIO, said in statement.

The union cases are in In re: Pension Reform Litigation, 2014 MR 1, Circuit Court, Sangamon County, Illinois (Springfield).

To contact the reporter on this story: Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg

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