Ruling may put crimp in pension plan

September 13, 2011

PROVIDENCE — State employees and schoolteachers “possess implied unilateral contract rights” to their pension benefits, a Superior Court judge ruled Tuesday, keeping alive a lawsuit challenging previous changes made in state pension laws and further complicating ongoing efforts to make more changes that General Treasurer Gina Raimondo says are necessary to avert a fiscal calamity.
Judge Sarah Taft-Carter’s 39-page decision quotes previous RI Supreme Court rulings to the effect that “pension benefits vest once an employee honorably and faithfully meets the applicable pension statute’s requirements…Therefore, upon full vesting, and subject to honorable service, a pension cannot be altered or revoked.”
The decision also asserts that, “…a COLA and a pension are one and the same.” One of the changes that the unions, led in the suit by Council 94, AFSCME, the state’s largest public employee union, were challenging was an adjustment to the annual cost of living allowance pensioners receive.
Pensions for the state’s judges and the State Police are also part of the Employees Retirement System of the State of Rhode Island.
The ruling is only a partial victory for the unions. It rejects the state’s motion to dismiss the union’s lawsuit and allows the case to proceed to determine whether pension changes made by the General Assembly and then-Gov. Donald Carciei substantially impair the contract and, if they do, whether that impairment is reasonable and necessary to fulfill an important public purpose.
“Whether the 2009 and 2010 Acts have substantially impaired the contract as it exists between plaintiffs and defendants is not the issue before this court,” the decision reads.
“Nor does this court make any findings as to whether the acts were, nevertheless, “reasonable and necessary to carry out a legitimate public purpose” such that they have not violated plaintiffs’ rights under the contract and takings clauses” of the RI Constitution.
The state will appeal Taft-Carter’s ruling to the state Supreme Court, Raimondo pledged.
“It’s not exactly a win where you are at the Super Bowl, but at least you got past the first playoff series,” AFL-CIO President George Nee told The Times after the ruling was issued.
Nee said the judge’s statement that the employees possess contract rights “is a pretty strong statement and validates, at least, what our basic argument is. It’s not just a decision that says ‘I’m not granting summary judgment, let’s go forward.’ There’s some meat on the bone there.”
Ken DeLorenzo, executive director of Council 94 agreed. “It’s a wonderful ruling, but it’s only Step 1. It’s just the judge confirming what we said all along: that pensions aren’t a gratuity and the state doesn’t have the ability to change pensions on a whim.
Invoking a phrase used by Gov. Lincoln Chafee in the charter school debate, Robert Walsh, executive director of the National Education Association of Rhode Island and a member of the pension study commission appointed by Raimondo, said “maybe this is time for a little bit of a thoughtful pause before they commit any more changes.”
“Absolutely not,” was Raimondo’s answer to that.
“The state can not afford its current pension obligations and must proceed” with the reform efforts, she said. “The state faces a pension crisis. As a public policy maker, as a fiduciary it is my strong recommendation that we not pause. We can’t afford to pause. This is a necessary state interest that we proceed to solve this crisis. It could take years for this particular litigation to be resolved and we certainly can’t wait years, it’s not fair and it’s not viable. I’m disappointed that would be his reaction. ”
“Obviously we are disappointed that the judge did not throw the case out, which is what the state was looking for, but we’ll be appealing the decision and nothing changes our plan. We are on a path to submit legislation to the General Assembly in October,” the treasurer said.
“We’ve known all along that this would be a long, protracted legal proceeding,” she said. “We’re kind of still in the first inning. It would have saved a lot of time and money had the case been thrown out right now, that didn’t happen.”
Asked if the judge’s determination that a COLA and a pension are one and the same would present a problem for any future pension changes being contemplated, Raimondo said “No,” but declined to elaborate because the litigation is ongoing.
In a joint written statement with Raimondo, Chafee said, “Today's lower court ruling recognized this is only the beginning of what could be a long legal process. We understand that this case will ultimately be decided by the Rhode Island Supreme Court.”
House Speaker Gordon Fox and Senate President Teresa Paiva Weed issued a joint statement Tuesday that said, "Today's ruling is an initial decision on one aspect of litigation relating to reforms enacted in 2009 and 2010. The ruling simply allows the employees to make their full argument to the Court in that matter.
"The Court's decision to deny summary judgment has no effect on the pension reform discussions scheduled to take place before the Joint House and Senate Finance Committees over the next three weeks. Around the time of the conclusion of those hearings we anticipate receiving a proposal from the General Treasurer's Office and the Governor that will be vetted by the full General Assembly in October.
"During the special session we anticipate taking whatever action is reasonable and necessary to address the pension crisis confronting the state.”