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Court hears arguments over 3 percent cut to employee retirement

The Florida Supreme Court heard oral arguments Friday in a case that could determine whether state legislators face another $2 billion budget hole next year, or state workers will see their salary cuts retained. 

The lawsuit, Scott v. Williams, was filed by the Florida Education Association after lawmakers passed and Gov. Rick Scott signed a 2011 law that imposed a 3 percent levy on 623,000 government worker salaries to offset the state’s investment into the Florida Retirement System.

Lawmakers argued at the time that the change was needed to fill a $3.6 billion budget gap and bring Florida in line with 47 states that require their government workers to contribute to their pension plans. The savings was then plowed back into the budget, not into the retirement fund.

But Leon County Circuit Court Judge Jackie Fulford ruled earlier this year that the pension changes were an unconstitutional because the changes impaired the contractual rights of the FRS employees, took private property without full compensation and impaired their collective bargaining rights. She ordered the state to halt the practice and reimburse workers with interest.

 Attorney General Pam Bondi and Republican legislative leaders immediately challenged the ruling, continued collecting money from employee paychecks. It is now up to the court to decide but a decision could take months.

If the seven justices uphold the lower court ruling, state and local governments will have to reimburse active workers in the Florida Retirement System and find a way to fill the resulting holes their budgets. The state and local government have already taken more than $900 million from from employees and are expected to take up to $2 billion by the end of the current fiscal year in June 2013. State economists have predicted that revenues appear to be meeting expectations and, for the first time in years, legislators may not face another year of belt tightening.

If the court upholds the ruling, employees could see a 3 percent increase in their paychecks and cost of living adjustments could be resumed.

Justice Charles Canady, appointed to the court by former Gov. Charlie Crist, seemed to sympathize with the state.

“The whole state budget will be thrown out of balance,’’ he said.  

The teacher’s union lawyer, Ron Meyer, replied that Canady was “making assumptions that are not part of the case here.” He argued that while the legislature had a right to proactively change the retirement system to require that employees contribute a portion of their annual salaries into it, it was unlawful for them to impose the change on employees currently working for state and local governments without winning approval for the change in collective bargaining negotiations.

"We believe you can't change the game in the middle of the game,'' he said.

Arguing for the state was former Supreme Court justice Raoul Cantero, now a lawyer from Miami. He cited a 1981 Florida Supreme Court case, Florida Sheriff’s Association v. Department of Administration, as the rationale for allowing it to change retirement benefits going forward and argued that if the lower court ruling is allowed to stand it “would handcuff the Legislature’s response to changing financial circumstances.” 

He argued that it would be practically impossible for the legislature to negotiate with 11 unions and their bargaining units.

Canady was not the only justice skeptical of the union’s argument, however, during the a 45-minute hearing. Justice Barbara Pariente also wondered how it could be lawful for the Legislature to increase retirement benefits without collective bargaining approval, as it has in the past, if it is now unlawful for them to reduce benefits without negotiations.

“Why would the legislature bind itself forever, no matter what the budget crisis was, to a plan that could not decrease benefits but only increase it?” she asked.

Meyer responded that it was a policy decision lawmakers made and “they can’t repeal a contractual right” retroactively but only can apply that to future employees. He also argued that the court should recede from the precedent in the 1981 court case.

“The contract says you have a right to a non-contributory system and you can’t take that right away,’’ he said.

The exchanges prompted Scott’s general counsel Jesse Panuccio to predict they will side with the state.

“We think pretty strongly the law is on our side and this change will be upheld and it’s a common sense pension reform so it won’t be an issue we’ll face,”  he said.

But Meyer warned that if the court upholds the law, it will violate the collective bargaining protections also in the constitution. “It’s well settled law that you can bargain over retirement systems,’’ he said, but the legislature violated workers rights when it imposed the 3 percent tax without winning approval from workers’ unions.

He rejected Cantero’s argument that it is impractical for lawmakers to negotiate with 11 state bargaining units and dozens more at the local level.

“Just because it’s difficult to implement a constitutional right doesn’t mean that you get away with not implementing it,’’ he said.