A court ruling favorable to Rhode Island state employees in a pension case is expected to further complicate debate in the state, where pensions have been central to a municipal bankruptcy and where a special legislative session will convene next month to discuss pension overhaul.
Superior Court Judge Sarah Taft-Carter ruled Tuesday that the retirement system is essentially “an implied contract” between the state and its employees. She allowed eight public employee unions to go ahead with a lawsuit seeking to block pension reductions.
“Case law does not preclude but rather supports this court’s holding that plaintiffs, as 10-year veterans of the state, possess a contractual relationship with the state pertaining to retirement allowances and [cost-of-living adjustment] benefits which are not subject to collective bargaining,” Taft-Carter wrote.
Gov. Lincoln Chafee and Treasurer Gina Raimondo said in a joint statement that they would seek immediate state Supreme Court review.
“Today’s lower court ruling recognized this is only the beginning of what could be a long legal process,” they said. “The state cannot afford its current pension obligations and must enact reform that is fair to the taxpayers and provides retirement security to retirees and active employees that is sustainable and affordable.”
In May, Raimondo issued a report saying the annual cost of Rhode Island’s pension fund could skyrocket to $1 billion by fiscal 2022 and that the retirement plan for state employees and teachers could run out of assets between 2019 and 2023.
Central Falls, a city of 18,000 north of Providence, filed for Chapter 9 bankruptcy protection on Aug. 1. The city faces an $80 million pension deficit.
“It’s going to take a long time and it’s going to be incredibly expensive. There’s going to be protracted legislation,” said Brian Fraser, a partner at Richards Kibbe & Orbe LLP in New York.
Central Falls receiver Robert Flanders, a retired state Supreme Court justice, recently ordered up to a 55% cut in police and fire pension benefits.
Meanwhile, the pro-union Rhode Island Retirement Security Coalition is marshaling opposition to pension reductions. In a video released this week urging pensioners to lobby state officials, including Chafee and Raimondo, a spokeswoman said: “Promises were made to Rhode Island workers. Promises should be kept. A simple concept, but one that is now in jeopardy.”