CHICAGO — The Minnesota attorney general’s office and lawyers representing state retirees in a lawsuit challenging benefit cuts will lay out their cases by the end of the month in summary judgment motions that seek a quick ruling.
A hearing during which both sides will argue their cases is set for March 22. The case is advancing as some local and state officials across the country have raised the specter of cutting what retirees believe are their vested pension rights to deal with deficits and growing unfunded pension liabilities.
At a hearing in September, Ramsey County District Court Judge Gregg Johnson heard initial arguments in the case in response to the attorney general office’s request that the lawsuit be dismissed. Johnson allowed the case to continue.
The attorney general is representing the defendants, which include the state, the pension funds, their top managers, and former Gov. Tim Pawlenty.
“The case is proceeding and both sides will file motions for summary judgment by the end of the month,” said Stephen Pincus, an attorney with Stember Feinstein Doyle Payne & Cordes LLC, which is representing the Minnesota retirees. The firm is also representing retirees involved in similar lawsuits pending in Colorado and South Dakota.
The lawsuit was filed May 17 after state legislation was enacted limiting future benefit increases for participants in the funds covering teachers, state employees, and local government employees.
The law signed last May eliminated a 2.5% annual increase in benefits. It lowered annual increases to a range of 0% to 2%, and in most cases those limits remain in place until the pension achieves a 90% funded ratio.
The changes were among a series of reforms enacted that also increased employee contributions. The changes are expected to save the pension system $2 billion over the next five years.
The lawsuit argues the legislation violates both state and federal laws governing contractual obligations and the taking of private property for public use. Lawyers are seeking class-action status to represent an estimated 75,000 retirees.
Lawyers from the attorney general’s office contend the Legislature has authority to modify retirement benefits and that the formula governing benefit increases is not guaranteed as a contract in state statutes. The state also argued that the law does not violate laws governing the taking of private property because the legislation affects only future benefits, not benefits currently in hand.
Pincus said his firm has filed a motion for summary judgment in the Colorado case and the case survived a motion to dismiss.
The South Dakota case remains in the early stages. Legal documents in the Minnesota case can be found at minnesotapensions.com.
Elected officials, pension fund managers, and participants in the public pension sector are following the cases closely as more attention is paid to the strains unfunded pension liabilities pose to governments.
The Pew Center on States last year warned that states face a combined $1 trillion pension funding shortfall based on 2008 figures.
While many issuers have cut the benefits of future employees, they are increasingly looking at how to rein in rising costs for current retirees.
Lawyers in the Minnesota case contend the retirees honored their payment obligations and the state could have avoided the need to cut cost-of-living adjustments by slightly increasing its own contributions.