COURTS

State Supreme Court hears arguments in controversial state pension fund case

 

Thousands of teachers, police, and other government workers could see some pay cuts restored if the Florida Supreme Court agrees with a lower court ruling over state pensions.

Herald/Times Tallahassee Bureau

The Florida Supreme Court heard oral arguments Friday in a case that could determine whether state legislators face another $2 billion budget hole next year, or state workers will see their salary cuts retained.

The lawsuit, Scott v. Williams, was filed by the Florida Education Association after lawmakers passed, and Gov. Rick Scott signed, a 2011 law that imposed a 3 percent levy on 623,000 government worker salaries to offset the state’s investment into the Florida Retirement System.

Lawmakers argued at the time that the change was needed to fill a $3.6 billion budget gap and bring Florida in line with 47 states that require their government workers to contribute to their pension plans. The savings was then plowed back into the budget, not into the retirement fund.

But Leon County Circuit Court Judge Jackie Fulford ruled earlier this year that the pension changes were unconstitutional because the changes impaired the contractual rights of the FRS employees, took private property without full compensation and impaired employee collective bargaining rights. She ordered the state to halt the practice and reimburse workers with interest.

Attorney General Pam Bondi and Republican legislative leaders immediately challenged the ruling and continued collecting money from employee payments. It is now up to the court to decide but a decision could take months.

If the seven justices uphold the lower court ruling, state and local governments will have to reimburse active workers in the Florida Retirement System and cover the resulting hole in their budgets. The state has already taken more than $900 million from employees and are expected to take up to $2 billion by June 30, 2013, the end of the state’s current fiscal year. State economists have predicted that revenues appear to be meeting expectations and, for the first time in years, legislators may not face another year of belt tightening.

If the court upholds the ruling, employees could see a 3 percent increase in their paychecks and cost of living adjustments could be resumed.

Justice Charles Canady, appointed to the court by former Gov. Charlie Crist, seemed to sympathize with the state.

“The whole state budget will be thrown out of balance,’’ he said.

The teacher’s union lawyer, Ron Meyer, argued that Canady was “making assumptions that are not part of the case here.” He said it was unlawful for the Legislature to impose the change on employees currently working for state and local governments without winning approval for the change in collective bargaining negotiations.

“We believe you can’t change the game in the middle of the game,’’ he said.

Arguing for the state was former Supreme Court Justice Raoul Cantero, now a lawyer from Miami. He cited a 1981 Florida Supreme Court case, Florida Sheriff’s Association v. Department of Administration, as the rationale for allowing it to change retirement benefits going forward and argued that if the lower court ruling is allowed to stand it “would handcuff the Legislature’s response to changing financial circumstances.”

He said it would be practically impossible for the Legislature to negotiate with 11 state bargaining units and dozens more at the local level.

Canady was not the only justice skeptical of the union’s argument, however, during the 45-minute hearing. Justice Barbara Pariente also wondered how it could be lawful for the Legislature to increase retirement benefits without collective bargaining approval.

“Why would the Legislature bind itself forever, no matter what the budget crisis was, to a plan that could not decrease benefits but only increase it?” she asked.

Meyer responded that it was a policy decision lawmakers made in 1974 when first agreed to make the FRS a non-contributory system in 1974. He said “they can’t repeal a contractual right” retroactively but can only apply the contribution requirement to future employees. He also argued that the court should reject the decision from the 1981 court case.

“The contract says you have a right to a non-contributory system and you can’t take that right away,’’ he said.

The exchanges prompted Scott’s general counsel Jesse Panuccio to predict the high court will side with the state.

“We think pretty strongly the law is on our side and this change will be upheld,” he said.

But Meyer warned that if the court upholds the law, it will violate the collective bargaining protections in the state Constitution. “It’s well settled law that you can bargain over retirement systems,’’ he said. He rejected Cantero’s argument that it is impractical for lawmakers to negotiate with many bargaining units.

“Just because it’s difficult to implement a constitutional right doesn’t mean that you get away with not implementing it,’’ he said.

Mary Ellen Klas can be reached at meklas@MiamiHerald.com. Follow her on Twitter @MaryEllenKlas

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