A promise is a promise…unless it’s inconvenient

Story Repair | ByMike Alberti | Labor, Pensions, State government

Though a decision in Rhode Island would not be binding on other state courts, Richard Kaplan of the University of Illinois explained that state judges tend to look at how other states have decided similar cases when making their own rulings. If other courts were to follow Rhode Island’s example, it would represent “a radical shift” in the legal landscape governing public pensions.

“It cuts against decades of precedent,” Kaplan said, “not to mention basic, commonsense notions of what pensions are and what’s fair.”

According to Secunda of Marquette University, a shift back towards a gratuity model would be “disastrous.”

A negotiated settlement?

In Rhode Island, several public employee unions have offered to negotiate with the state, and Gov. Chafee has expressed interest in doing so.

State Treasurer Gina Raimondo, however, has so far refused to meet with the union leaders. Raimondo, the architect of the pension changes now in dispute, however, is apparently still looking for total victory.

“We have a strong case,” she told the Associated Press  “I trust the courts. Let’s let it weave its way through.”

“What the states are trying to do is change the rules in the middle of the game,” he said. “They’re saying, ‘We’ll play by a certain set of rules until the game is not in our favor anymore, and then we’ll change them.’ Try explaining that to a five-year-old and see if they think it should be allowed.”

Kaplan agreed. “What the states told these workers was that ‘if you do x, you’ll get y.’ You can be sure that the states didn’t say, ‘if you do x, and we feel like we can afford it, you’ll get y.’”

Joseph Slater, a professor of law at the University of Toledo and a labor historian, explained that, historically, states and local governments have used the promise of secure pensions to justify paying public employees less than they might earn in the private sector.

“If they knew that that promise didn’t really mean anything, people might have made different decisions about what job to do,” he said. “This is part of the reason why they decided to dedicate their lives to public service.”

So far, the Superior Court Associate Justice Sarah Taft-Carter, who is assigned to the Rhode Island pension cases, has seemed to agree with those arguments. In a 2011 ruling on another lawsuit concerning previous, less drastic changes that the state legislature had made to the pension system, she ruled that pensions do constitute “implicit contracts.”

In that decision, Justice Taft-Carter explicitly rejected the gratuity model. “The benefits provided…[to retirees] are not gratuities that may be taken away at the whim of the State,” she wrote, adding that reliance on “[m]edieval notions of the beneficence and graciousness of worldly monarchs have no relevance to modern notions of sovereignty.”

 

“What’s legal isn’t necessarily fair”

John Tarantino is a attorney representing the Governor, the Treasurer, and the Employees’ Retirement System of Rhode Island in the lawsuits. In a recent interview with Remapping Debate, Tarantino explained that the state’s argument in the current lawsuits hinges on convincing Justice Taft-Carter (or the State Supreme Court, if the state loses this case and appeals it) that the legislation that set benefit levels in the past was no different than any other law, meaning that the legislature can change those benefits at any time. According to that theory, the state lawmakers can legislatively modify the benefits that public employees have been promised as easily as they might change the speed limit.

“We believe that the decisions of one legislature should not be binding on the decisions of a future legislature,” he said.

When asked whether he believed it was reasonable for the workers, when they were hired, to expect and rely on the benefits that were outlined to them, however, Tarantino said, “Absolutely.”

And doesn’t that promise make the law different from other legislation that can be changed at any time?

“Listen, I take promises very seriously,” Tarantino said. “I’m a man of my word. But just because I make a promise to you, that doesn’t mean that we have a contract.” 

But wouldn’t breaking that promise violate basic notions of equity and fairness?

“That stuff doesn’t matter,” Tarantino responded. “All I’m going to try to prove is that it’s legal. What’s legal isn’t necessarily fair.”

Another potential escape route for states?

When pension benefits and other promises are deemed to enjoy contractual protections, that does not mean that the state cannot break those promises under any circumstances. It is generally agreed that the terms of a contract may be changed if breaking the promise is found to be “reasonable and necessary” to achieve an “important public purpose.”

According to Richard Kaplan, a professor of law at the University of Illinois, proving that reneging on their pension obligations is necessary to achieve an important public purpose is a high bar to reach, because that argument implies that the state’s ability to raise taxes to keep its promises have been exhausted.

“That argument might make sense if the state is really in extremis, if we’re talking about going without teachers and firefighters,” Kaplan said. “But even in that case, the state would have to convince the court that raising taxes was somehow off the table.”

In Rhode Island, however, the state is currently making what several legal observers characterized as a far more extreme argument: that it is not under any contractual obligation to keep its promises to its employees about their pension at all.

“Rhode Island isn’t arguing that it had no choice but to make these cuts or else public welfare would be jeopardized,” said Stephen Pincus, an attorney with a Pittsburgh law firm who has represented state employees in pension lawsuits in other states. “The state is saying that employees have no contract rights to their pensions at all.”

“In that argument,” Pincus continued, “the circumstances aren’t important. The state is saying that they can change the terms of the agreement at any time,” regardless of whether doing so is reasonable and necessary for an important public purpose.

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