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Pro-union state pension decision sure to complicate so-called reform agenda

September 13, 2011

Rhode Island’s public employee unions have won the first round in the contentious joust over state pension benefits.

Superior Court Judge Sarah Taft-Carter has denied state government’s attempt to establish that the state can unilaterally reduce the pension benefits  and cost-of-living benefits of state employees and retirees.

“This is step one and we have a lot of steps to go,’’ said Lynette Labinger, lawyer for the unions representing a wide spectrum of Rhode Island public employees. “We do have one day to appreciate a decision we are very happy with.’’

Lawyers for the state had requested that the court throw out case, asserting that the employees have no property or contract rights to pensions. But Taft-Carter said in a 39-page decision that the state legislature and administration does not have the sole right to change the terms of state pensions.

“The state was basically saying that we had no right to be heard,’’ said Labinger.

The judge said that the state’s position that it can “significantly alter or completely terminate a public employee’s pension benefits at any time…is untenable.’’

The decision is important because Taft-Carter said clearly that the state may not take away state pension benefits “at the whim of the state.’’

Rhode Island and many other states around the nation are struggling with huge unfunded pension liabilities that threaten the financial foundation of state and municipal governments.

In Rhode Island’s case, the state faces an unfunded liability of at least $7 billion, a figure that is more than twice the amount of the state’s General Fund annual state budget.

At issue in the lawsuit were changes stemming from legislative measures approved in 2005 and 2009 that cut pension benefits and trimmed cost-of-living requirements to employees in a campaign to cut pension costs to taxpayers and save about $60 million in the current state budget year.

Because there is so much at stake, Taft-Carter’s decision is likely to draw an appeal from the state. In her decision, Taft-Carter acknowledged that the issue of   precisely what contractual or property rights an employee has are legally murky.

State Treasurer Gina Raimondo and Governor Lincoln Chafee have pushed for a special Assembly pension session next month to overhaul the state pension system to make it more affordable to taxpayers. Today’s decision may jeopardize that session being able to make definitive decisions. And it will inevitably mean that both sides will be heading back to the court house, and perhaps, to the negotiating table.

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