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Illinois teachers sue in effort to block pension reform law

CHICAGO, Dec 27 (Reuters) - A group of teachers and public school officials filed a class-action lawsuit on Friday in state court seeking to void Illinois' new pension reform law on grounds the cuts to pension benefits violate the state constitution.

The lawsuit, filed in Cook County Circuit Court in Chicago, claims that changes to current and retired teacher pensions passed by the Illinois General Assembly and signed into law by Governor Pat Quinn earlier this month violate protections for public sector worker retirement benefits in the Illinois Constitution.

With the state's finances buckling under a $100 billion unfunded pension liability, the controversial measure reduces and suspends cost-of-living increases for pensions, raises retirement ages and limits the salaries on which pensions are based.

The lawsuit names Quinn, Illinois Comptroller Judy Baar Topinka and the Illinois Teachers' Retirement System's (TRS) board of trustees as defendants and seeks preliminary and permanent injunctive relief. It was filed as a class action, representing retired and active members of TRS, who are not currently members of any teachers' labor union.

It is also only the first shot of litigation against the law, which a coalition of public labor unions has vowed to fight. Anders Lindall, a spokesman for the coalition, We Are One Illinois, said the group is consulting with attorneys "to prepare to bring the most effective suit possible."

Brooke Anderson, Quinn's spokeswoman, said while litigation against the law was anticipated, the reforms are expected to meet constitutional scrutiny. Spokesmen for Topinka and for TRS declined to comment.

The reforms, which take effect in June, are expected to save the state $160 billion over 30 years, while immediately reducing the unfunded pension liability by 20 percent. The law offers workers and retirees some sweeteners, including a reduction in contributions toward pensions and a method for ensuring the state fully makes its contributions.

The law was seen as a positive development by major credit rating agencies, which have pounded Illinois' bond ratings to the lowest levels among the states after repeated failure to address its pension problem. The agencies, however, also cited implementation risk for the law due to litigation.

The educators' lawsuit cites an Illinois constitutional provision that deems membership in any state retirement system to be an enforceable contractual relationship, "the benefits of which shall not be diminished or impaired."

The pension reform law includes a preamble section seemingly designed to counter a legal challenge that concludes Illinois' fiscal problems could not be solved without changes to the retirement system structure.