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Fla. SC says retirement system changes was constitutional

By Nathan Bass | Jan 18, 2013

TALAHASSEE, Fla. (Legal Newsline) - The Florida Supreme Court on Thursday found that the amending of the Florida Retirement System by the state Legislature, which made several significant changes including changing the pension from noncontributory to contributory, was facially constitutional.

The legislation requires all current FRS members to contribute 3 percent of their salaries to the system and eliminates the retirement cost-of-living adjustment for creditable service after the effective date of the act.

The case is styled Rick Scott, et al vs. George Williams, et al., on appeal and it has generated interest nationally as it is representative of the type of battles going on in many states as they try and reign in underfunded pensions, often clashing with public service unions in the process.

There were four separate opinions with Justice Jorge Labarga writing the majority opinion and Chief Justice Ricky Polston and Justices Barbara J. Pariente and Charles T. Canady concurring. Pariente wrote a separate opinion to which Canady and Labarga concurred.

Justice James E.C. Perry wrote a dissenting opinion joined by Justices Peggy A. Quince and R. Fred Lewis. Lewis wrote a separate dissenting opinion as well.

The court gave the parties until Jan. 25 to file any motion for rehearing.

The holding reversed the judgment of the Circuit Court of the Second Judicial Circuit in and for Leon County "in its entirety" and is viewed by organized unions as a significant defeat.

Teamsters Joint Council 75 President Ken Wood said he is disappointed that the Court overturned years of precedent in the way the states pensions are funded, according to PR Newswire. Wood said Teamster attorneys will review the decision before deciding on next steps.

"Pensions are simply deferred wages, and it is in Florida's interest to make sure the workers who transport our children to school, protect our communities and perform essential services can retire in dignity and modest comfort." Wood said.

"We begin," wrote Labarga in the controlling opinion, "with an overview of the challenged provisions of chapter 2011-68, Laws of Florida. Since 1975, until the July 1, 2011, effective date of the amendments at issue here, the FRS was noncontributory for most state and local employee members, meaning that the plan was funded entirely by public employer contributions.

"Further, prior to the 2011 amendments, the FRS plan provided for retired members to receive a cost-of-living adjustment (COLA) equal to 3 percent of the total monthly benefit, which was calculated once yearly.

The Plaintiffs and interveners, consisting of a large number of state and local employees as well as various union and employee organizations, challenged two facets of the 2011 pension amendments: the sections requiring members of FRS to pay 3 percent of their pay into the pension plan and the amendment eliminating COLA adjustments for service performed by FRS members after June 30, 2011.

"The circuit court," the opinion states, "held that the Legislature substantially breached the employees' contract rights guaranteed by the preservation of rights statute by requiring employee contributions to the FRS and by elimination of the COLA, and further held that this breach was not justified by the existence of a significant budget shortfall where other, reasonable alternatives existed to preserve the State's contract with FRS members.

"The State contends that the 2011 amendments to the FRS operate prospectively only and, thus, the trial court's order finding that the law impairs existing contract rights of current members of the FRS is inconsistent with this Court's interpretation of the preservation of rights statute in Florida Sheriffs," Labarga wrote.

"Both parties agree that if an existing member of the FRS retired on June 30, 2011, none of his or her benefits would be diminished. Both parties agree that an employee continuing on in employment will be required to contribute 3 percent of his or her gross compensation to the FRS in order to receive the same retirement benefit that he or she would have expected to receive, absent the amendments, without making any contribution.

"Further, the amendments provide that upon retirement, any right to a COLA is limited to a calculation giving credit only for the employee's service performed prior to July 1, 2011. It is for these employees who continue on in employment after June 30, 2011, that the parties' characterization of their rights and benefits diverge.

The State made the case that because the contribution requirement and the elimination of the COLA did not take effect until July 1, 2011, the amendments were "purely prospective" and therefore did not violate contract rights.

The plaintiffs contended that although the changes in the plan occur at a later date, "the changes diminish the total expected retirement benefits that could have accrued over the entire projected life of a member's employment for those persons employed prior to the amendments who continue their employment after the amendments."

The trial court agreed with the plaintiffs, finding that the rights to a noncontributory plan and a continuing COLA were "contractually guaranteed upon commencement of employment."

"We first noted in Florida Sheriffs," wrote Labarga, "that long before the enactment of the preservation of rights statute, this Court had held that Florida's constitutional contracts clause 'did not protect a governmental mandatory retirement system and that the legislature could modify or alter benefits provided by such a retirement plan.'

"We stated in Voorhees that the rights of such persons in a pension fund 'are not such as will prevent the Legislature from repealing or amending the statute, merely because the officer or employee has contributed to the fund so long as the fund existed and the law stood unrepealed.'

"We again hold, as we did in Florida Sheriffs, that the preservation of rights statute was not intended to bind future legislatures from prospectively altering benefits for future service performed by all members of the FRS.

"We further hold that the 2011 amendments requiring a 3 percent employee contribution as of July 1, 2011, and continuing thereafter, and the elimination of the COLA for service performed after that date are prospective changes within the authority of the Legislature to make.

"The preservation of rights statute does not create binding contract rights for existing employees to future retirement benefits based upon the FRS plan that was in place prior to July 1, 2011.

The Court then turned to the challenger's argument that the contribution requirement and elimination of COLA did "unconstitutionally impair or abridge the right of public employees to bargain collectively on the issue of retirement benefits."

"The State reiterated in its brief that 'absolutely nothing precludes Plaintiffs from bargaining over FRS' and 'the Plan Amendment does not prohibit government employees from engaging in collective bargaining over retirement benefits.' We agree.

"Because we conclude that the amendments, on their face, do not prohibit collective bargaining on issues of retirement, we do not reach the State's argument that the Legislature may limit the right to collective bargaining on retirement issues based on the principle of separation of powers and the Legislature's exclusive control over public funds."

Lewis wrote in dissent, "This conflict impacts a significantly important category of Florida workers, our first responders, those who provide safety and security for all citizens, those who provide education and safety for our children, and thousands of other Floridians who provide essential services for all Floridians each and every day.

"These governmental employees are not second class citizens but are entitled to the full protection of the law just as all other Floridians enjoy.

"The contractual rights of government employees as established in the statute we consider today cannot receive lesser protection than other contractual rights because to do so would violate the "rule of law" and reduce all to the status of being subject to the whim of those who may be in power at any particular time and from time to time."

Perry expressed similar sentiment in his dissent.

"In my view, the challenged provisions of chapter 2011-68, Laws of Florida, amount to an insufferable and unconstitutional "bait and switch" at the expense of public employees who were members of the Florida Retirement System (FRS) prior to July 1, 2011.

"After improperly considering that case law, the Court in Florida Sheriffs held that the preservation of rights statute 'vests all rights and benefits already earned under the present retirement plan so that the legislature may now only alter retirement benefits prospectively,' and that the statute 'was not intended to bind future legislatures from prospectively altering benefits which accrue for future state service.'

"In so doing, the Court violated the plain meaning rule and read into the preservation of rights statute words and concepts that simply are not there. The present majority repeats and compounds this error."

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