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NPPC Concludes Detroit Pensions Not a Precedent for Illinois

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"Recent court decisions in Arizona and San Jose have added to the mounting pile of evidence that the earned retirement benefits of our nation's teachers, firefighters, police officers, and thousands of other public employees are contractual obligations protected by law or by state constitutions," the National Public Pension Coalition (N.P.P.C.) stated in a press release a public relations firm sent me. "These cases set critical precedent for states like Illinois, where the legislature's move to cut benefits for retirees is facing a serious legal challenge."

"Following Judge Rhodes' decision that pension benefits could be cut in the Detroit bankruptcy, national pundits quickly declared that it was legal open season on public workers," said Jordan Marks, Executive Director of the National Public Pension Coalition. "Based on recent legal verdicts, this couldn't be further from the truth."

The situation in Detroit was unique. Judge Rhodes ruled that retirement benefits could be cut because federal bankruptcy law trumped Michigan's constitutional protections for public pensions. No other city or state considering gutting their pensions are facing bankruptcy.

According to Beeson, Tayer & Bodine's Teague Paterson, Mayor Chuck Reed pushed a legally dubious 'Measure B,' which would have cut the pensions of city employees who couldn't contribute a whopping additional 16 percent of theirsalary [sic] toward retirement. The courts rejected the initiative, stating that as part of employee contracts, retirement benefits are protected by the state constitution.

In Arizona, judges unanimously overturned a 2011 law that lowered benefits by tinkeringwith [sic] the formula that calculates how benefits are paid. According to the Arizona Capitol Times, 'The justices said a voter-approved section of the state constitution makes public pension plans a contractual relationship. More to the point, that provision says benefits ‘shall not be diminished or impaired.'

According to Governing Magazine, 41 states protect pensions via contract law. In seven states, including Michigan and Illinois, the constitution contains specific provisions that protect publicpensions [sic].

"States -- especially states like Illinois where the constitution specifically prohibits cuts to benefits -- should be warned that devastating cuts to retirement security will not pass the muster of the courts," Marks concluded.

In a similar vein, last week, Marks stated in a press release on the NPPC's Web site, in response to the bankruptcy blueprint filed Friday, February 21, 2014 by Detroit Emergency Manager Kevyn Orr, “Governor Snyder and Kevyn Orr might consider this blueprint a 'comeback' and 'the best path forward,' but don’t believe the hype. A more than 30 percent cut combined with the virtual elimination of health care is devastating to the people who dedicated a career to Detroit, and depend on these benefits to meet basic needs. Wall Street, which posted record profits in 2013, can afford to pay for the damage it reaped on the City. We can and must do better.”

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