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Update: Court rules 4-3 in favor of state, tells workers they lose 3 percent in retirement battle

In a major victory for the state, the Florida Supreme Court ruled 4-3 against state workers and allowed the state to retain the 3 percent levy on worker salaries to offset the state's investment into the Florida Retirement SystemDownload Retirement ruling

The ruling allows lawmakers to avoid another $2 billion budget hole in the 2013-14 fiscal year while all state workers will see their salary cuts retained indefinitely and will continue to see no cost of living increases adjustments made to their retirement accounts. 

The lawsuit, Scott v. Williams, was filed by the Florida Education Association after lawmakers passed, and Gov. Rick Scott signed, a law in 2011 to tap salaries of 623,000 teachers, law enforcement officers, firefighters, nurse and other public employees and put the money into the retirement system.

In the decision written by Justice Jorge Labarga, the court cited a 1981 ruling in Florida Sheriff’s and said the unions and trial court were incorrect in concluding that the decision was not intended to allow changes in retirement contribution plans for both current and future employees.

“We recognized the authority of the Legislature to amend a retirement plan prospectively, so long as any benefits tied to service performed prior to the amendment date are not lost or impaired,’’ the ruling said, noting that the court “took special care in Florida Sheriffs” not to bind future legislatures. 

Justices R. Fred Lewis, Peggy Quince and James E.C. Perry disagreed with the ruling and Lewis and Perry wrote separate dissenting opinions. Justice Barbara Pariente wrote a concurring opinion explaining that the decision should not be viewed as a judgment on the policy but instead whether it was constitutional, which she conceded it was. 

"Ultimately, I recognize the frustrate of state employees who have in effect experienced a 3 percent reduction in their net pay as a result of the Legislature’s changes to the retirement plan. Indeed, these changes affect judges and all judicial branch employees as well,'' she said. "However, this case is not a referendum on the Legislature’s policy decision."

Union officials were disappointed with the ruling.

 “Balancing the state budget on the backs of middle-class working families is the wrong approach for legislative leaders and the governor to take,’’ said Andy Ford, president of the FEA, who said he would use the decision to encourage Floridians to replace the governor and the Republican-led leadership in 2014.

"The 2014 campaign begins today,'' he said. "We’re going to have a focus on changing the politicians in Tallahassee who don’t care about working Floridians."

Matt Puckett of the Florida Police Benevolent Association said that while members “obviously are disappointed” they hope to keep any future reforms to the pension system “to a minimum.’’

“We’re a nation of laws. We respect the decision of the court. It seems well reasoned. We’ll deal with it,’’ he said. 

Senate President Don Gaetz commended the ruling and said the changes were necessary "to maintain a sound retirement system for our hard-working state and local government employees as well as the reality that Florida taxpayers can no longer bear the full cost of this benefit."

The governor predicted the ruling will lure more employers to Florida.

“The court’s ruling today supports our efforts to lower the cost of living for Florida families,'' Scott said in a statement. "This means even more businesses will locate and grow in our state, which creates even more opportunities for Floridians to live their version of the American dream.”

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.

The ruling overturns a decision by Leon County Circuit Court Judge Jackie Fulford, who ruled in 2012 that the pension changes were unconstitutional because they impaired the contractual rights of the FRS employees, took private property without full compensation and impaired employee 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 and continued collecting money from employee payments. 

If the seven justices had upheld the lower court ruling, state and local governments would have to reimburse active workers in the Florida Retirement System and cover the resulting hole in their budgets.

House budget chief, Rep. Seth McKeel, R-Lakeland, said if current conditions hold, the ruling provides lawmakers with needed certainty this budget year and "Florida will be able to have a more normal budget."

The state has withdrawn more than $900 million from employees salaries since the law took effect July 1, 2011, and are expected to take up to $2 billion by June 30, 2013, the end of the state’s current fiscal year. 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. 

Union leaders said they hope the improved fiscal conditions will allow lawmakers to grant state employees pay raises for the first time in six years, to offset some of the cost of the cut to their pay from the retirement change.

Senate budget chief, Sen. Joe Negron, R-Palm City, said the issues aren't linked. "We're well aware that state workers haven't had a raise in six years, as is the case with the private sector. It's one thing we'll consider."

Ron Meyer, attorney for the FEA, challenge Scott's rosy view of the ruling. 

"It’s a great day for Florida families if starvation is a good thing,'' he said. "The fact of the matter is a school teacher, a policeman, a state worker, all these public employees, can scarcely afford a 3 percent reduction in their pay.''