Illinois adopted a statute that tweaked public pensions:
On January 1, 2020, Public Act 101-610 became effective and amended, in pertinent part, portions of the pension code to consolidate all applicable local police and firefighter pension fund assets into two statewide pension investment funds, one for police and the other for firefighters. Pursuant to the Act, the local pension funds were required to transfer custody and investment responsibility for their fund assets to the respective statewide funds, which are now tasked with collectively investing and administering the pooled assets. The Act provided a transition period that ended on June 30, 2022, for the transfer of securities, assets, and the investment function from the local funds to the statewide investment funds.
There's more detail on the statute in the Illinois Supreme Court's opinion in Arlington Heights Police Pension Fund v. Pritzker, No. 129471 (Jan. 19, 2024), but we'll leave those details to you. Suffice it to say that the public unions did not appreciate these amendments, and sued in an Illinois court, alleging (inter alia) that these tweaks resulted in an Illinois-law taking. Oh, there were other claims, but you know we're going to focus on the takings stuff.
The plaintiffs argued:
Plaintiffs’ complaint alleged that the Act diminishes and impairs their pension benefits because, (1) prior to the Act, the local funds could “exclusively manage and control their investment expenditures and income”; (2) their “voting power and thereby an effective say in the selection of investment managers, investments, risks, rates of return, costs and expenses” was diluted by the participation of members of other local funds; and (3) the local funds must bear the costs associated with the Act’s transition process, including repayment of any IFA transition loans.
Slip op. at 4.
The trial court didn't buy it because the Illinois takings clause only governs real property (really!), and thus the plaintiffs had no takings clause property at stake. The appellate court agreed on the result (if not the reasoning), holding that "because plaintiffs have no property right in any particular assets or level of funding and are entitled only to present or future payments from the funds, they could not establish the private property requirement for their takings claim." Slip op. at 5.
The Illinois Supreme Court also agreed. Skip forward to page 10 to get to the takings stuff. Thankfully, the court didn't adopt the trial court's reasoning that property only includes real property. Instead, the court held that the plaintiffs have no property right in the source of funding for their pensions:
As the appellate court correctly concluded, the Act does not take any of plaintiffs’ private property. As participants in a defined benefit plan, they have a right to receive their promised benefits but do not somehow have a private property right in the source of funding for those payments. Plaintiffs claim that the Act requires them to fully transfer ownership of their private property, comprising the securities and other fund assets. The Act does not operate in that manner. It simply changes the control and management of the local funds’ assets from one government-created pension fund to another type of government-created pension fund. As defendants assert, although plaintiffs have a constitutional right to receive the benefit payments promised to them, which the Act does not change, they do not have a property right to any particular level of assets used to pay those benefits or in the way those assets are held or invested.¶ 37 Plaintiffs have failed to identify any property right under Illinois law that is affected by the 2020 amendment to the Pension Code. It is undisputed that the Act does not impact the pension payments that plaintiffs are entitled to receive. Additionally, as defendants recognize, plaintiffs’ takings claim must also fail because even if they had a property right in the local funds’ assets, which they do not, the Act would not constitute a taking of that property for the government’s use. The Act simply changes how local fund assets are managed and invested without affecting the ultimate use of those assets to pay the benefits of local fund members.
Slip op. at 10-11.
And you know what "no property" means - no taking.
Arlington Heights Police Pension Fund v. Pritzker, No. 129471 (Ill. Jan. 19, 2024)
