UPDATE 3-Judge rules Chicago pension reform law is unconstitutional

Source: Reuters

(Reuters) - A law aimed at shoring up two of Chicago's financially shaky public worker retirement systems violates pension protections in the Illinois constitution, a judge ruled on Friday.

The ruling is a setback for Mayor Rahm Emanuel who has repeatedly said he will not raise taxes without pension reforms. It also gives Illinois' public labor unions more leverage to resist pension cuts.

In a written opinion, Cook County Circuit Court Judge Rita Novak rejected Chicago's arguments that the 2014 law results in a net benefit because it will save the municipal and laborers' retirement systems from insolvency and that the law was backed by a majority of affected labor unions. She also took issue with Chicago's contention that it was not legally on the hook to pay pensions.

"The city's argument, premised on the notion that participants have no right vis a vis their employer to expect payment of their pension benefits, is fundamentally at odds with the supreme court's teachings," Novak wrote.

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Read more: http://www.reuters.com/article/2015/07/24/usa-chicago-pensions-idUSL1N1041CQ20150724

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Funds | Fri Jul 24, 2015 3:51pm EDT

(Adds trading in Chicago bonds, Fitch analyst's comment)

By Karen Pierog