A Cook County judge on Friday shot down Chicago Mayor Rahm Emanuel's plans to reform major city employee pension funds, saying the Illinois Constitution prohibits the proposed changes.
The ruling will require the cash-strapped city to come up with an additional $250 million over the next five years to meet the pension fund obligations.
The ruling was the latest twist in long-running budget woes for the city, which has a $20 billion unfunded liability in the city worker pension fund. The city school system alone has a $1.1 billion deficit in its current budget, thanks largely to $675 million in pension obligations. Credit-rating agency Moody's Investor's Services has downgraded the city's bonds to "junk" status, making further efforts to finance the debt harder.
The Windy City's budget problems are not unique. Crushing pension debt, caused by lawmakers and union leaders negotiating generous benefits without ensuring sufficient payments into the fund, is a problem in many major cities. Detroit was forced to go to court last year to reform its pension system, which had previously prohibited reductions in benefits.
Emanuel attempted a similar route in Chicago, proposing that employee contributions to the Municipal Employees and Laborers Pension Fund be raised by 29 percent and that compounded cost-of-living adjustments for retirees not eligible for Social Security be ended.
The city argued that without the reforms the fund would collapse within a decade. Public employee unions nevertheless sued the city, saying the state constitution barred such changes. On Friday a judge agreed.
"Ultimately, the city needs to raise adequate revenue to keep its promises to employees and retirees and to provide all of the public services that all city residents rely on: education, public safety, healthcare and more," Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, told the Chicago Sun-Times.
Chicago-area residents are already paying higher costs to service the debt. Earlier this year, Cook County supervisors raised the sales tax a full point from 0.75 percent to 1.75 percent, primarily to help meet pension costs.
The mayor's office did not immediately issue a statement. Emanuel is expected to appeal the decision to the state supreme court, but is not expected to get a ruling in his favor there, either.