While the Florida Legislature continues to debate how best to reform the state's pension system, a philanthropic foundation has issued a report surveying how various reform measures havefaredin at least 22 different state courts.
State and municipal pension systems are in financial trouble, reports the Pension Litigation Summary, released by the Laura and John Arnold Foundation (LJAF), noting that the states are, collectively, at least $757 billion short of the funding needed to meet the pension promises. Moreover, that figure depends on a risky set of assumptions (e.g., expected rate of return and life expectancy) and may be considerably larger if reality does not match the predictions made by each system. Estimates produced using more conservative assumptions, similar to those used for private sector pensions, approximately double the shortfall.
The report says LJAF is currently aware of 54 lawsuits that were filed or that were the subject of a court decision between January 2009 and April 2013, three of which were in Florida.
"The most significant legal claim raised against pension reform legislation is that it violates the Contracts Clause of the U.S. Constitution or a states constitutional parallel (including additional provisions specifically protecting pension rights)," according to the report. "The argument of pension reform opponents is that a pension promise to a state employee is essentially a contract, and that legislation that diminishes pension benefits alters the terms of the states contractual obligation to provide the agreed-upon remuneration to the employee."
As the report goes on to note, that argument was rejected by the Florida Supreme Court in January, when it upheld 2011 reforms passed by the Legislature, ruling that the Florida Constitution did not prevent the Legislature fromalteringfuture retirement benefits, so long as state employees were compensated according to the terms of their employment agreement for work already performed.
The report notes two other Florida cases, both originating in Miami-Dade County. One ongoing suit, against the city of Miami and currently before the 11thJudicial Circuit Court of Florida, is challenging the constitutionality of a statute that gives local governments authorityto declare a financial urgency that creates an impasse for collective bargaining.
And in June 2012, the 3rd District Court of Appeal ruled in favor of the city of Miami, declaring that the results of collective bargaining agreements could not be submitted for voter approval through a referendum. In that case, the pension board refused to implementan agreement that lowered benefits, on the grounds that a Florida statute required voter approval before local public employee pensions could be reduced. The court struck down the statute as violating the state Constitution's right to collective bargaining.
Cases in other states reviewed by the LJAF include:
Louisiana -- The 19th Judicial District Court in Baton Rouge struck down pension reform legislation and stated that the Legislature violated the state Constitution by enacting the law after failing to approve the measure by a two-thirds majority.
California -- The California Public Employment Relations Board issued a preliminary opinion finding an unfair labor practice violation against the city of San Diego. The pension reform measure was blocked as it was determined to be subject to collective bargaining requirements before the voters could approve it.
"Courts have expressed a wide range of views on pension reform issues, at times arriving at diametrically opposite conclusions," the report summarizes. "For example, reductions of cost-of-living adjustments were upheld in Colorado, Minnesota, New Jersey, and South Dakota state courts, whereas the same adjustments were struck down in Arizona. ... To date, there is little to no definitive guidance or uniformity of interpretation on these matters, either at a state or federal level."
Reach Eric Giunta at egiunta@sunshinestatenews.com or at (954) 235-9116.
