Rhode Island Court: "Upon retirement, under Rhode Island law, COLAs and pension benefits are one and the same, providing retirees with a vested interest in the benefits which may not be altered retroactively."
Just as politics was in the driver's seat in 2009/2010 during the Colorado PERA pension contract breach (SB10-001), politics was in the driver's seat in Rhode Island during the 2011 Rhode Island pension contract breach attempt.
In Rhode Island, State Treasurer Gina Raimondo hoped to ride the pension contract breach she championed all the way to the Rhode Island Governor's mansion.
(Note that unlike Colorado's public sector unions, public sector unions in Rhode Island sued the state over their Legislature's attempted pension COLA-taking.)
Colorado public sector unions sold their soul in 2009/2010 by going along with an attempt to let Colorado state and local government employers off the hook for their contractual obligations to pay accrued PERA pension benefits. Colorado teacher union officials let PERA-affiliated employers off the hook for their failure to pay annual PERA pension bills for a decade, for their failure to make PERA actuarially required contributions (ARC), identified by PERA's own actuaries.
Colorado public sector union leaders agreed with (or initiated?) the attempted PERA pension contract breach in SB10-001. What thanks have union-represented Colorado teachers received for supporting breach of PERA pension contracts in 2010? Here is their answer: Minimal state legislative support for restoration of K-12 funding as the Colorado economy continues to improve, unnecessarily minimal buy down of the K-12 "negative-factor" by the Colorado Legislature.
Here's what union-represented teachers agreed to in 2010: teacher union leaders agreed to the attempt to shift state and local government financial obligations onto the backs of "fully-vested" PERA retirees, breaking written, statutory PERA contracts. For many, since this backroom deal tarnished the spirit of the U.S. Labor Movement itself, and took money from the state's elderly to keep taxes low in our state, the deal was hard to swallow.
So, how have teachers been repaid? In return, in 2014, the State Legislature is providing minimal support for K-12 education going forward, and with lots of strings attached to the proposed miserly funding effort. Such a deal!!
What Colorado politician has the stones to stand up and publicly state the obvious? TABOR is crushing our state. TABOR does not sanction breach of state contracts!
A few days ago a Rhode Island court confirmed the contractual nature of public pension COLA benefits in Rhode Island. Here is media coverage of the Rhode Island court decision, from Plansponsor.com:
"In its opinion, the court rejected the state’s argument that no contractual relationship existed between it and the plaintiffs at the time the pension reform was enacted. The court noted that under Rhode Island law, retirees are provided benefits and cost-of-living adjustments (COLAs) which may not be altered retroactively."
"The court found that in exchange for the offer, the retirees had fully performed their duties as public-sector employees for the required number of years and had already retired before the reform was enacted. 'Plaintiffs’ pension benefits constitute part of their compensation for the services which they have already rendered to the State,' the opinion says."
More press coverage:
"In her ruling, Taft-Carter found that there is 'an implied in-fact contract' between the state and the public employees challenging the pension overhaul."
"In deciding Wednesday to reject the state’s 2012 motion to dismiss the case, Taft-Carter noted that the plaintiffs had served the public and contributed the required amount toward their pensions."
Link to the recent Rhode Island court's opinion on a motion to dismiss:
Excerpts from the Rhode Island court opinion:
"The General Assembly, in November 2011, enacted the RIRSA, which overhauled the public pension system. Specifically, the legislation reduced the pension benefits, including the COLA, for retired employees."
"It also provides that no annual COLAs will be paid to retired teachers and state employees until the retirement system is eighty percent funded, which is not estimated to occur for about sixteen years."
(Note that the union plaintiffs in Rhode Island are also defending rights to "partially-vested" pension contracts until an 80 percent pension funding ratio is reached, unlike Colorado where "fully-vested" pension contracts were targeted in 2010 until a ridiculous and unnecessary 100 percent pension funding ratio is achieved.)
"This Court denied Defendants’ motion for summary judgment on September 13, 2011, holding that the plaintiffs had a unilateral implied-in-fact contractual right arising from their partial performance by working at least ten years."
"Plaintiffs urge the Court to follow its analysis in Pension I, wherein this Court found that vested employees possessed implied-in-fact contract rights to their pension benefits."
"It is well-settled, however, that these doctrines may not be used by government simply 'as a means to escape from contracts that it subsequently concluded were unwise.'”
"Specifically, 'a statute is itself treated as a contract when the language and circumstances evince a legislative intent to create private rights of a contractual nature enforceable against the State.'”
"Accordingly, this Court will consider whether the State made an offer to the Plaintiffs, whether the Plaintiffs accepted the offer, and whether the offer and acceptance were supported by consideration and a valid contract."
"There is no doubt, however, that in Rhode Island pensions are not gratuities of the State."
(As we have seen, the Colorado Constitution prohibits the payment of gratuities. If a PERA pension COLA benefit is a gratuity, it is unconstitutional.)
"Indeed, the only difference between deferred compensation and contract theories is the time at which pension rights vest."
"Upon retirement, under Rhode Island law, COLAs and pension benefits are one and the same, providing retirees with a vested interest in the benefits which may not be altered retroactively."
"Courts have long accepted the importance of pension benefits as a 'term and condition of public employment.'"
"Here, Plaintiffs accepted the State’s offer of pension benefits by beginning their employment with the State and continued their service for the required time."
"Through Plaintiffs’ faithful service, the State had already received the full benefits it expected from creating the ERSRI. Plaintiffs’ pension benefits constitute part of their compensation for the services which they have already rendered to the State."
"Because there has been a bargained-for exchange, supported by consideration, this Court finds that there is an enforceable implied-in-fact contract between Plaintiffs and the State."
"Furthermore, our Supreme Court’s jurisprudence supports a finding that Plaintiffs possess protected contractual rights in receiving a pension and a COLA."
"Here, having retired, the Plaintiffs have fully performed. A valid contract exists between Plaintiffs and the State, entitling Plaintiffs to their pension benefits."
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