The last time I heard attorney John Fitzgerald was when I attended the 2013 state convention of the Illinois Retired Teachers Association.
The issue he addressed at the time was a state law that would later be passed by the Illinois legislature in December of 2013 and signed by then-Democratic Gov. Pat Quinn that stopped automatic, compounded yearly cost-of-living increases for retirees, extended retirement ages for current state workers and limited the amount of salary used to calculate pension benefits.
John is a member of the law firm of Tabet, DiVito and Rothstein. At the 2013 IRTA convention John laid out what would later be the legal arguments that his fellow attorney Gino DiVito would make in his oral argument as lead attorney before the Illinois Supreme Court. While other state unions and organizations representing active and retired pubic employees had legal representation, Tabet, DiVito and Rothstein were paid for by individual donations of members of IRTA.
And we won by an 8-0 vote of the Illinois Supreme Court.
I promised a number of people, including my good friend Glen Brown, that I would try and take good notes from Fitzgerald’s key note speech today.
So here they are:
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 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 judgement 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 Firefighters 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.