Arizona Supremes shoot down pension benefit cut
Thursday, Feb 20, 2014 - Posted by Rich Miller
* The Arizona Supreme Court ruled today that the state legislature cannot cut state retiree COLAs…
The ruling released Thursday comes in a case brought after the Legislature cut the increases in 2011 for retirees in the state plan for judges and elected officials. […]
The Legislature cut the cost-of-living increases after the judges’ retirement system lost money in the Great Recession and became badly underfunded. The retired judges argued the increases were a promised benefit and lower courts agreed.
The high court agreed the increases are part of a promised retirement benefit and are protected by the pension clause of the state Constitution. That clause bars “diminishing or impairing” public retirement benefits.
The Arizona Constitution is very similar to ours in that regard. But, of course, the ruling has no direct impact here. It could be used by the plaintiffs to buttress their case, however. Our high court often looks at what other state courts have done.
- 47th Ward - Thursday, Feb 20, 14 @ 1:34 pm:
Now I know why the judges were left out of the bill.
- Rich Miller - Thursday, Feb 20, 14 @ 1:39 pm:
That’s correct, 47th.
- Anon. - Thursday, Feb 20, 14 @ 1:41 pm:
==Now I know why the judges were left out of the bill.==
A really snarky person might say that only someone foolish enough to think the bill is constitutional would also be foolish enough to think the judges wouldn’t be aware that, if they ruled the General Assembly could screw the teachers and other state employees, they would be ruling that the General Assembly could also screw the judges. But not me.
- PublicServant - Thursday, Feb 20, 14 @ 1:43 pm:
Waiting for Arizona Bob to weigh in here with his deep insight…
Waiting for the diligent Illinois press to ask the candidates for governor, and, well Ty, R Eden, and Larry about it too.
Waiting for IPI and Illinois Review to generate an article or two on it.
While I don’t like the fact that our Pension Theft bill passed, I get more and more confident every day that this travesty of a law will be overturned in its entirety.
- In the Middle - Thursday, Feb 20, 14 @ 1:44 pm:
We have a conservative-leaning high court. I can’t see the outcome any different than Arizona.
- I B Strapped - Thursday, Feb 20, 14 @ 1:45 pm:
Agree Anon but I would never say that either because snark isn’t becoming.
- Norseman - Thursday, Feb 20, 14 @ 1:54 pm:
Expected.
- kimocat - Thursday, Feb 20, 14 @ 2:01 pm:
Well, now we know there is justice for some in the world. Now we see if that is true in Illinois.
- dupage dan - Thursday, Feb 20, 14 @ 2:02 pm:
WI gov Walker left public safety officers out of his union busting legislation. It worked for him since at the election level, folks can be swayed by that kind of tactic. I think Quinn is mistaken if he believes such a tactic will work at the judicial level.
- Formerly Known As... - Thursday, Feb 20, 14 @ 2:05 pm:
Great news.
Also a good omen for those who have worked for our state for so many years of their lives.
- nikobey - Thursday, Feb 20, 14 @ 2:16 pm:
It will be interesting to observe the eventual impact of this decision on the Illinois courts and on the Republican gubernatorial primary election campaign. The CHICAGO TRIBUNE response should also make good reading.
- anon - Thursday, Feb 20, 14 @ 2:18 pm:
You can find the opinion here: http://www.azcourts.gov/opinions/SearchOpinionsMemoDecs.aspx?year=2014&court=999
- Finally Out (formerly Ready to Get Out) - Thursday, Feb 20, 14 @ 2:24 pm:
To the SCOAZ…..Thank you!
- RNUG - Thursday, Feb 20, 14 @ 2:31 pm:
Agree with Norseman … expected.
- Cook County Commoner - Thursday, Feb 20, 14 @ 2:41 pm:
Thanks anon for the link to the decision. The AZ court’s reference to the “rule of necessity” appears to settle the conflict of interest and recusal issue concerning a court ruling on its own pension.
- Professor B - Thursday, Feb 20, 14 @ 2:42 pm:
What strikes me as interesting is that the story states the law was passed in 2011, and the decision is coming in 2014. Perhaps this detail says the most about what (or when) to look forward to?
- JoeM - Thursday, Feb 20, 14 @ 2:48 pm:
It should also be noted that in 2011 the AZ legislature passed SB 1614 that made state employees contribute more out of their paychecks towards their pensions.
State employees sued based on AZ contract and pension protection clauses of their Constitution.
Superior Court of Arizona, Maricopa County Judge Eileen S. Willett ruled in April of 2012 that given the Arizona constitutional provision stating that pension benefits cannot be diminished or impaired, it was illegal
to make employees pay more for a benefit than they had paid when first starting employment.
As of May 7, 2012, state lawmakers in Arizona enacted House Bill 2264 to reverse the contribution rate change and mandated a refund of the excess contributions.
- West Side the Best Side - Thursday, Feb 20, 14 @ 2:50 pm:
The Arizona opinion cites an Illinois appellate court opinion holding benefit increases to be constitutionally protected and referenced the Illinois Constitution’s Article 13, Section 5 which deals with pension and retirement rights.
- RNUG - Thursday, Feb 20, 14 @ 2:55 pm:
Just read the entire decision. With a few changes in case names and citations, the ISC could use most of it pretty much as it stands.
The parallels with Illinois are amazing. Couple of things jumped out. They referenced contract law, which is what I expect most of the IL decision to turn on. They also noted that, like IL, benefits vest at hiring. In declaring the benefit formula protected, they even cited the IL Miller case as part of their reasoning.
The one win that the State of AZ got was no legal fees were awarded to the plaintiff.
- RNUG - Thursday, Feb 20, 14 @ 3:17 pm:
There’s one or two other potential nuggets in the decision that most people are going to read right past. I’m still thinking it over but there might be at least one other piece of good news in there too.
- JImbo - Thursday, Feb 20, 14 @ 3:28 pm:
No one ever expected this to hold up in the SC. It’s all about being able to pass a “balanced” budget in the years preceding the ruling. Just my opinion, but the plain language in the Constitution, and previous rulings pretty much dictate it will be overturned.
- Andrew Szakmary - Thursday, Feb 20, 14 @ 3:44 pm:
There is another bit of news over the past week that is relevant to Illinois pension AAIs/COLAs that has been overlooked on this board. Last November, as part of a bipartisan budget agreement, the U.S. Congress cut COLAs for military retirees younger than 62. Instead of getting full inflation, they would have gotten the CPI less 1% when fully phased in - all in all a less draconian cut in present value terms than what Illinois did to its retirees. Well, apparently Congress has had second thoughts, because both the House and Senate recently repealed the military COLA cuts, by overwhelming margins, for anyone who enlisted before January 1, 2014. Given this development and the Arizona SC ruling, if Illinois judges vote to uphold the pension theft law they will be the laughingstock of the entire country.
- Casual Observer - Thursday, Feb 20, 14 @ 3:48 pm:
Does AZ refer to their annual increase as a COLA or AAI?
- Arthur Andersen - Thursday, Feb 20, 14 @ 3:56 pm:
RNUG, as always, is spot on in his analysis. The similarities of the two situations are indeed remarkable.
- RNUG - Thursday, Feb 20, 14 @ 4:02 pm:
It’s referred to as an annual increase, not a COLA.
- Sunshine - Thursday, Feb 20, 14 @ 4:05 pm:
What 47th said!
- RNUG - Thursday, Feb 20, 14 @ 4:07 pm:
Should have added, the AZ annual increase is formula based with some conditions, so it’s bit more complicated than the flat 3% in IL. But the decision flatly rejects (confirms appellate decision) the legislative changes that resulted in a reduction in the annual increase, both historical (since it’s been several years) and prospectively (going forward).
- Casual Observer - Thursday, Feb 20, 14 @ 4:09 pm:
Thanks for the response RNUG. That helps too, right?
- Andrew Szakmary - Thursday, Feb 20, 14 @ 4:09 pm:
One more tidbit: The Arizona SC ruling was unanimous - not a single dissenting vote.
- RNUG - Thursday, Feb 20, 14 @ 4:21 pm:
While other state’s decisions are not legally binding on IL, judges do look at similarly situated states as seen by the Miller citation in the AZ decision. So yes, it helps put another nail in the coffin lid.
- RNUG - Thursday, Feb 20, 14 @ 4:26 pm:
-AA-,
Thanks. Been half watching that one since the appellate decision. As you said, the similarities are there. AZ more or less copied the IL and NY constitutional language.
- second street - Thursday, Feb 20, 14 @ 4:58 pm:
When will the court hand down a decision in the health insurance case for retirees (Senate Bill 1313 of 2012). The case was heard in September of 2013. The judges are included in that law.
- Joan P. - Thursday, Feb 20, 14 @ 5:17 pm:
Sweet!
I’m not sure that Congress’ change of heart on the military retirees’ COLA is as relevant as Andrew Szakmary does. That seems to me more a response to the fact that it’s politically extremely unpopular to take any benefits away from service members.
Other public servants don’t get the same respect.
- RNUG - Thursday, Feb 20, 14 @ 5:22 pm:
Rumor is it will be released after the primary.
After reading the AZ decision and one paragraph in particular that I’m still mulling over, I’m wondering if the ISC needs to review any already composed Maag language.
- Oswego Willy - Thursday, Feb 20, 14 @ 5:50 pm:
Between Rich having the “House Band” of - RNUG -, - AA -, and - steve schnorf -, I am looking forward to more info from this Crew.
Just keep at it Fellas.
- anon - Thursday, Feb 20, 14 @ 6:56 pm:
Those who have practiced in front of the Illinois Supreme Court would not view this as an inordinate delay in issuing an opinion. A cursory comparison of the Court’s list of cases argued in September and the opinions subsequently issued shows that a sizeable percentage are still awaiting decision.
- Arthur Andersen - Thursday, Feb 20, 14 @ 6:56 pm:
Bingo, RNUG!
- Capo - Thursday, Feb 20, 14 @ 7:13 pm:
You could probably hear a pin drop in the state house tonight.
- OLD BRASS - Thursday, Feb 20, 14 @ 8:07 pm:
“WI gov Walker left public safety officers out of his union busting legislation.”…..that, and more than ever, he needed the State Troopers to keep the public from burning down his Capitol Building!
- YO - Thursday, Feb 20, 14 @ 8:07 pm:
It’s comforting to know that contracts and constitutions are being recognized (at least in AZ) as real. The AZ court has ethics and morals, as you would expect of justices. I am hopeful that what I have said will apply to our state but this is Illinois.
- kcjenkins - Thursday, Feb 20, 14 @ 8:18 pm:
Kanerva (the pension case) is at least a month away. It’s been 155 days since it was submitted. In 2013, median for unanimous decisions was 103 days, for divided decisions, 185 days. Fields will cast a long shadow over Illinois pension litigation - the law of the two states is very similar. My analysis of Fields and its implications for Illinois is here, if you’re interested: http://www.appellatestrategist.com/2014/02/articles/jurisdictions/illinois/what-the-pension-reform-decision-in-arizona-may-mean-for-illinois/.
- Go sox - Thursday, Feb 20, 14 @ 9:12 pm:
A conservative-leaning high court? Really?!?!
- Old and in the Way - Thursday, Feb 20, 14 @ 9:38 pm:
The AZ (Fields) Decision causes mojor problems for both Illinois pension suits. The COLA/AAI cut is clearly unconstitutional and Fields would certainly affirm that. However, as RNUG would seem to imply, and I agree, this ruling and aspects of it raise questions about the cuts in subsidized health care as well (Kanerva/Maag).
The AZ court affirms that ‘benefits’ are more than a just a pension or an annuity and include other ‘benefits’ of employment. IAG Madigan asserted that the IL clause “protects only pension benefits and does not prevent the government from raising the cost of other employment benefits, including health insurance.”
The Fields decision, unanimous I might add, would seem to refute this logic. RNUG…….your thoughts? Will ISC see it this way?
- In the Middle - Thursday, Feb 20, 14 @ 9:52 pm:
Go sox @9:12… lol!
4 of the 7, yes. Based on that I just mean they aren’t inclined to overturn an established interpretation of the Constitution. Honestly, I can’t see the other 3 overturning it either.
That’s just my two cents, and I think it’s good news for retirees.
- RNUG - Thursday, Feb 20, 14 @ 11:36 pm:
– Old and In the Way –,
Yes, that’s what I was implying while I thought it over. Afraid I might have been reading a bit too much into it; kind of wanted to see if anyone else caught that.
I especially found the language on page 3, Section 1, Item 3 suggestive. The inclusion of ‘medical subsidies’ as part of ‘additional financial benefits’ definitely suggests something like paid health insurance is also protected in the eyes of the AZ court.
Don’t know if the ISC will see it the same way but, IMO, the 20 yr / premium free health insurance is at least an implied contract with a deferred compensation component. The fact it was codified (written) in IL State Statute just reinforces the idea of it being a enforceable contract. Then you add on the fact that the latest legislation re health insurance NOW uses explicit language to deny it being a contract, and I think the preponderance of the evidence says the GA believes it was or could have been said to be a contract.
Since I don’t get a vote, we can only hope the ISC sees it the way I do.
- Old and in the Way - Friday, Feb 21, 14 @ 6:14 am:
RNUG
I agree and was struck as much by the tone and tenor of this decision as I was the content. The court, at least in my opinion, seemed just a bit annoyed with what the legislature was trying to do. Just as in Illinois the legislature created the crisis and then wanted to use it to justify clearly unconstitutional remedies. Reading the transcripts of the court was also interesting. I think this will have an impact on the ISC the question is just how much. Regardless I wouldn’t count on any pension reform savings if I were PQ or the GA. I wonder what The Baron’s response will be?
- PublicServant - Friday, Feb 21, 14 @ 6:43 am:
The Baron will, of course, say “The Union Bosses have, once again, had their way in Arizona. But, here in Illinois, when I’m Governor, that’s gonna stop. It’s finished, finito. Right now, I’m convening a Judicial Summit at my ranch, and inviting all the Illinois Justices and their families. I’m inviting Arne Duncan, and my old buddy Rahm too. He knows how to get his way, and so do I. When we get done with them, those “Justices”, sorry for the giggle, will interpret the law exactly how I want them to, and you and definitely they, can take that to the bank…literally”
- Anonymous - Friday, Feb 21, 14 @ 7:01 am:
Thought this might interest you Rich.
http://ecowatch.com/2014/02/08/campaign-contributions-coal-baron-chris-cline/
- Andrew Szakmary - Friday, Feb 21, 14 @ 8:21 am:
On COLA cuts, yet another nail in the coffin this morning:
WASHINGTON (AP) — President Barack Obama will propose an election-year budget that would drop reductions he had previously embraced in federal benefits, officials disclosed Thursday….Obama is scrapping his previous offer to trim cost-of-living increases in Social Security and other benefit programs.
- Anonymous - Friday, Feb 21, 14 @ 8:54 am:
The AZ decision says that the medical subsidies are part of the Retirement Plan. I read that as saying the medical subsidies are paid for through the Retirement Plan. I believe in Illinois the medical insurance in not paid for through the retirement systems. The AZ case also notes, the general principle that statutory provisions do not create contractual rights. While I think the AZ decision does strengthen the argument against the change in the Illinois pension system, at least for benefits accrued, I do not see it as applying to the Illinois insurance issue.
- RNUG - Friday, Feb 21, 14 @ 9:35 am:
Anonymous,
It’s more than already accrued benefits. The AZ decision reiterated the pension contract terms apply as of date of hiring, which has also been consistently ruled in IL.
- G.I.Joe - Friday, Feb 21, 14 @ 9:40 am:
Illinois alread is ‘the laughingstock of the entire country’.- Andrew Szakmary -
- voltaire - Friday, Feb 21, 14 @ 10:36 am:
Just for the record, here are the two relevant clauses from the Illinois and Arizona State Constitutions:
Illinois State Constitution
Article XIII; SECTION 5. PENSION AND RETIREMENT RIGHTS
Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.
Arizona State Constitution
ARTICLE XXIX; Section 1. Public Retirement Systems
Membership in a public retirement system is a contractual relationship that is subject to article II, § 25, and public retirement system benefits shall not be diminished or impaired.
(Article II, section 25 reads: 25. Bills of attainder; ex post facto laws; impairment of contract obligations Section 25. No bill of attainder, ex-post-facto law, or law impairing the obligation of a contract, shall ever be enacted.)