Chicago Sues State Comptroller over Pension Intercepts

City funds have been diverted to local pensions over alleged unpaid contributions.

The city of Chicago is suing the Illinois state comptroller’s office, as well as the boards of various municipal pension funds, to stop the interception of state grant money based on the funds’ claims that the city owes them additional pension contributions.

The pension funds being sued include the Chicago Policeman’s Annuity and Benefit Fund, the Municipal Employees Annuity and Benefit Fund, and the Laborers’ Annuity and Benefit Fund.

In court documents, the city said the funds falsely certified that they are owed additional contributions, and that the state comptroller has accepted those certifications as true and started to intercept funds that would have otherwise been paid to the city programs that support children, the elderly, and the homeless.

“The comptroller’s continued interception of these grant funds creates a significant threat that certain unallocated city funds intended for future risks and unanticipated shortfalls will be depleted and unavailable when needed,” said the city in its complaint. “This could lead to cuts in services and a reduction in personnel if there are not enough unallocated funds to respond to an emergency or other unexpected budget shortfall.”

Under the Illinois Pension Code, Chicago has certain obligations to finance the city’s pension funds each year. The purpose of the annual funding obligation for each fund is to increase their overall assets to 90% of their actuarial liabilities by some time during the middle of this century.

For each of the funds, the financing provision includes a “grant intercept” clause that states that if the city fails to pay the required contributions for more than 90 days after the payment due date, then the funds, after giving notice to the city, certify to the state comptroller the amounts of the delinquent payments. The comptroller must then deduct and deposit the certified amounts into the fund.

In the lawsuit, the city also claimed it wasn’t given a hearing by the state comptroller to dispute the pension funds’ determinations, which the city said is contrary to the comptroller office’s rules and regulations, and against state law.

“The comptroller’s interception of the grant funds without a final determination following a hearing before an impartial tribunal as to the city’s obligation to pay the alleged debt is also a denial of due process” under the Illinois Constitution, said the city. “The city has suffered and will continue to suffer irreparable harm as a result of the funds’ false certifications and the comptroller’s acceptance of those certifications.”

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