The state has reached a potential settlement with thousands of past and present government employees over the constitutionality of the state’s 2011 pension-cutting law.
General Assembly approval is still required. And the benefits of the settlement would not apply to the three relatively small groups of municipal police and firefighters who rejected it.
But after weeks of gag-order secrecy and closed-door voting by thousands of public workers and retirees, former state Supreme Court Chief Justice Frank Williams, serving as mediator in the case, unveiled the proposed agreement in a crowded courtroom Thursday afternoon.
Speaking to Superior Court Judge Sarah Taft-Carter, overseeing the case, Williams said: “I’m very pleased to report we have succeeded in resolving” most of the lawsuits. “This is an awesome, awesome achievement.”
The deal would lower the retirement age — and increase benefits — for some workers, and increase the chances of more frequent pension increases. It would affect almost 59,000 past and present state and municipal workers.
Williams, who refused to talk at any length to reporters as he left the courtroom, said in passing that the settlement was approved by majority votes by all but three unions.
Those opposing unions, he said, represent about 800 police and firefighters; most are members of the International Brotherhood of Police Officers, which has locals in about 20 Rhode Island communities. Cranston police and Cranston firefighters also rejected the proposal. Those unions are free to continue their lawsuits.
The proposed settlement — which may finally close the legal war over unprecedented benefit cuts and the $4 billion that the pension law saved in future taxpayer contributions — immediately put on hold the trial, set to begin April 20.
But the proposal still needs legislative approval. And Taft-Carter must hold a hearing and rule on whether to certify the deal as a fair class-action settlement for all parties affected.
Taft-Carter said she would hold periodic status hearings in the coming weeks to make sure the settlement remained “on track” and possibly “reset the trial date” on June 8 if progress wasn’t being made.
Representatives of state retirees, teachers and workers, expressed resignation and relief with the settlement.
“It’s fair to say the retirees are not completely happy with the settlement,” said Roger B. Boudreau, chairman of the 7,000-member Rhode Island Public Employees Retiree Coalition. The settlement is but “a fraction” of the pension benefits promised retirees, he said, and which lifetime plans were based on.
“However, they are mindful that if we were to go to trial … the likelihood of us prevailing is very slim,” Boudreau said.
The plaintiffs would have had to prove “beyond a reasonable doubt” that the state’s benefit reductions were not only an unconstitutional breach of contract but were both unnecessary and arbitrary — an unusually high standard of proof for a civil case.
Robert A. Walsh Jr., executive director of the National Education Association, Rhode Island, one of the state’s largest teachers’ unions, said “this is not a joyous occasion [but] we are relieved,” adding, “When settlement and ultimate victory start looking the same, it’s time to settle.”
Walsh said he believed the plaintiffs would have prevailed on the question of whether the state broke its contract with workers over pension benefits, but they probably would have failed on the question of “the greater government purpose when the pension system was in the state it was.”
“It was a very difficult vote for our members,” he said, but in the end 73 percent of NEARI members voted in favor.
In a statement, Cranston Mayor Allan Fung expressed disappointment that the proposed settlement would exclude Cranston Police and Firefighters.
Fung said he was concerned that Cranston taxpayers “may incur tremendous legal costs to defend against the legal challenges brought by police and fire unions against pension reform, while also incurring additional increases in pension costs for municipal employees and teachers who will be included in the new settlement agreement.”
As news of the proposed settlement spread, House Speaker Nicholas Mattiello said he believed the settlement was “in the best interests of the state, its citizens, the retirees and employees.”
Mattiello said, however, that he hadn’t yet reviewed the specifics. “The House of Representatives will conduct its due diligence as part of the legislative process and we have established no timetable at this point.”
In 2011, faced with potentially crippling increases in state pension costs, state lawmakers raised the retirement age for public employees in the state-run retirement system, reduced guaranteed, lifetime pensions while providing employees with new employer-matched 401(k)-style plans, and suspended the payment of annual cost-of-living adjustments to retirees.
The law drew national attention — and placed the plan’s architect, then-treasurer and now Governor Raimondo, in the spotlight; at the time, virtually nowhere else had government reached back to cut benefits of people already retired to solve its burgeoning pension crisis.
The state’s public employee unions sued, alleging this sweeping rewrite of state pension law — and earlier pension cuts — violated contract protections in the state Constitution.
‘Right thing to do’
Raimondo told reporters at a late-day briefing she was pleased the state had reached a proposed settlement agreement with all but a “tiny fraction’’ of those who sued.
While stressing, again, her belief that “the state had a strong case,’’ Raimondo said taking “the litigation risk off the table is the right thing to do … for all the people of Rhode Island.’’
She said the proposed settlement would preserve “over 90 percent’’ of the long-term savings, anticipated by the 2011 overhaul, and dismiss six of nine pending lawsuits.
Raimondo and state Treasurer Seth Magaziner provided copies of a March 13 letter from the state’s pension consultants, summing up the terms of the proposed settlement. They include:
- Two one-time payments of $500 each to current retirees, with one payable a month after final approval of the deal and the other a year later.
- For retirees, there would be more frequent pension increases: every four years, instead of five. And the first increase in years for many would be in 2017, on a larger portion of their pension check than current law allows. For current retirees who have gone without any COLA since the pension overhaul law took effect, the increase would apply to their first $30,000 in benefits, adjusted for inflation; for others, the first $25,000.
- Police and firefighters would be able to retire at any age, after 27 years on the job. Others could retire, with a full pension, when their age and years-of-service add up to 95. They could retire at age 62, after 33 years of service, for example.
These were among the proposal’s sweeteners that still includes all of the key points of a defeated settlement proposal from last year.
Last year’s proposal would have, effectively, allowed about 7,000 longtime public employees to buy their way out of the new 401(k)-style plan and secure a larger defined-benefit pension — in which each year of work is worth 2 percent of pay, instead of 1 percent — by contributing more out of their paychecks.
Raimondo’s pension adviser, lawyer Mark Dingley, said the parties have until April 13 to put the terms of the agreement in writing and formally request Taft-Carter to certify the groups that approved the settlement as a class.
Dingley said the proposed settlement comes with an additional annual cost at roughly $31.6 million, with the state responsible for about $18 million and the cities and towns picking up the rest. The overall additional cost over time would be an additional $290 million.
Source: Providence Journal