In February 2021, the boards of 16 Illinois municipal police pension funds and two firefighters pension funds, along with some participants from those pension funds, filed a lawsuit in Kane County against Pritzker and the boards of the two new consolidated funds among others, alleging the law creating the consolidated funds had violated Illinois Constitution clauses by terminating "plaintiffs' authority to exclusively manage and control their investment expenditures and income," according to the original court filing.
The Illinois Constitution's pension clause says "membership in any pension or retirement system of the state, any unit of local government, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired." The plaintiffs argued that the pension clause defined "benefits" as more than the monetary benefit retirees and beneficiaries received, but also included board voting rights.
In May 2022, Kane County Circuit Court Judge Robert Villa said that the law creating the consolidated funds was not unconstitutional under the Illinois Constitution's pension and takings clauses, and the Appellate Court of Illinois, Second District in Elgin, said "while plaintiffs have a constitutional right to receive pension benefits … they have no right to the investments held by the funds; rather, they are entitled only to present or future payments from the funds." An appellate court upheld Villa's ruling in February 2023, and three months later, the state's Supreme Court agreed to hear the case.
In its Jan. 19 opinion, Illinois' top court said that while plaintiffs have a "constitutional right to receive the benefit payments promised to them, which the (2019 consolidation) 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."
The law that created the consolidated pension investment funds was the result of the findings of a Pension Consolidation Feasibility Task Force that Pritzker created early in 2019. The task force found that consolidating the state's 649 municipal police and firefighters' pension funds would generate investment returns well above the annualized 2% its report said the plans had achieved in the prior 10 years due to their small sizes. As of December 2019, 424 municipal and firefighters' pension funds had less than $20 million in assets each.
The consolidated pension investment funds had until June 30, 2022 to transfer the assets from the 649 municipal pension funds, and are now in the midst of building their investment programs. Both pension investment funds have primarily utilized passive investments during the transition in receiving assets and have spent the second half of 2023 beginning to build out their long-term investment portfolios.
For their first fiscal year, the Illinois Police Officers' Pension Investment Fund posted a net return of 8.8%, and the Illinois Firefighters' Pension Investment Fund posted a net return of 9.7%, both for the year ended June 30.
In a statement, the Illinois police officers' fund said it was "pleased" with the ruling. "As has been the case since our inception, the IPOPIF team will remain a transparent, trusted and financially responsible steward of the pension fund assets entrusted to our care, and we will diligently serve all our stakeholders. We are laser-focused on investment excellence, which means achieving the best risk-adjusted returns possible through the prudent investment of contributions and investment income," the statement said.
Daniel Konicek, attorney for the plaintiffs with Konicek & Dillon, could not be immediately reached for comment.