Attention, state legislatures and city councils considering laws
to lessen the burden of pensions for public workers: The Florida
Supreme Court issued a ruling Thursday that addresses
constitutional challenges to the state's 2011 pension overhaul.
The good news for other governments that want to rein in public
pension liability? The Florida court said the overhaul was not
an illegal government "taking" and did not improperly interfere
with workers' protected contract rights. The not-so-good news?
The ruling is very narrowly tailored as an interpretation of
Florida precedent and the state constitution.
Florida legislators were mindful enough of constitutional
considerations that when they passed amendments to state pension
law in early 2011, they made the changes prospective. Past
pension benefits weren't affected by the amendments, but after
July 2011, the new law said, state workers would have to
contribute 3 percent of their gross compensation to a plan that
had previously required no employee contribution; and they would
have to forgo 3 percent annual cost-of-living adjustments to
their pensions. The prospective consequences of the law seemed
to comply with the Supreme Court's 1981 holding in Florida Sheriffs Association v. Department of Administration, which said
that although past benefits are protected under the state
constitution's contract clause, the legislature has the power to
change future pension rights.
Nevertheless, state workers sued to block the new law,
arguing that the changes violated not only a state law
prohibiting any impairment of the rights of pension
beneficiaries but also the state constitution's version of the
Fifth Amendment's Takings Clause. A Florida trial court sided
with the workers on both points, concluding that the Florida
Sheriffs ruling did not justify sweeping reform that abridged
employees' collective bargaining rights.
Thursday's ruling by the Supreme Court reversed the trial
court but stopped well short of offering broad support for the
constitutionality of pension cost-shifting. The court reiterated
its holding from Florida Sheriffs that state law "does not
create binding contract rights for existing employees to future
retirement benefits" and said that the new law's changes were,
indeed, prospective and thus legal. As for the takings argument,
the Supreme Court said the amendments, on their face, do not
preclude collective bargaining, so workers haven't been deprived
of their rights.
By ruling narrowly that its old decision in Florida Sheriffs
controls consideration of the new law, the court avoided the
tough questions of whether the constitution permits the state's
budgetary interests to trump contracts clause protection of
pension benefits and whether lawmakers can limit collective
bargaining "based on the principle of separation of powers and
the legislature's exclusive control over public funds." The
opinion discusses the high court's precedent on the first
question, which calls for a balancing approach, but didn't end
up engaging in that balancing.
We're going to see many more rulings this year on the
legality of pension cost-shifting under the U.S. and various
state constitutions. I hope the next one tackles the big issues.
I left a message for the workers' lawyer, Ronald Meyer of
Meyer, Brooks, Demma and Blohm, but didn't hear back.
(Reporting by Alison Frankel)
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