RI Judge to Hear Unions’ Challenge to Pension Changes

July 18, 2011 (PLANSPONSOR.com) - A Rhode Island judge is scheduled to weigh arguments in a lawsuit by public-employee unions challenging reductions in pension benefits.

The Providence Journal reports that the lawsuit by eight unions representing state workers and public school teachers asks the court to block cuts in pension benefits enacted by the General Assembly in 2009 and 2010. The changes increased the number of years that employees must work before retiring, reduced the size of their pensions, and limited post-retirement cost-of-living allowances.   

According to the Journal, the fate of the lawsuit not only will determine whether strapped taxpayers can realize those savings –– projected at $59.6 million in this fiscal year alone –– but also will set the legal backdrop to current changes being considered by state leaders as the General Assembly prepares to meet in special session this fall to take up comprehensive pension reform.  

The state has moved for summary judgment, arguing that the case should be thrown out because Rhode Island law does not establish a contractual relationship guaranteeing unchanged pension benefits, and even if a court did find that a contractual relationship exists, past court decisions have held that governments can curtail benefits for an important public purpose, such as Rhode Island’s current financial crisis.  

The news report said the unions’ lawyer, Lynette Labinger, counters in court papers that “decisions of the Rhode Island Supreme Court confirm that the pension rights at issue here are contract rights, a form of deferred compensation which is an integral part of the employment relationship.” In this case, Labinger argues, “members, year in and year out, have contributed a substantial percentage of their annual compensation in direct exchange for participation in the retirement system on specific terms. The standards for eligibility and the amount of the pension were guaranteed by the State.”   

A New Hampshire judge recently rejected a request from the New Hampshire Retirement System to immediately block implementation of part of a new pension overhaul (see Judge Rejects Request to Block Part of NH Pension Reform).