A promise is a promise…unless it’s inconvenient

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

Do states really have no choice?

According to several legal experts, the argument that pensions enjoy no contractual protections can best be seen as a tactical decision on the part of the states to try to get around what they originally intended when they promised certain pension benefits to their employees.

An Intimidation tactic?

States may also be able to use the threat of going back on their promises to extract preemptive concessions from public employee unions.

In Illinois, for example, Governor Pat Quinn and state lawmakers have proposed several versions of pension legislation, the latest of which would, among other changes, reduce cost-of-living adjustments, raise the retirement age, and increase employee contributions. The legislation surprised many observers because Illinois has long had some of the strongest pension protections in the country, including a specific clause saying that pension benefits “shall not be diminished or impaired.”

Though they have vowed to fight the legislation in court, a coalition of public employee unions in Illinois has also offered to negotiate for pension changes with the state.

“Nobody’s had any great philosophical revelation about contract theory,” said Kaplan said. “The state is just trying to find any argument that allows them to get out of their obligations and that will stick in court.

Stein agreed, and added that the context for the Rhode Island lawsuits and several others around the country was that past lawmakers persistently failed to make their necessary contributions to the pension system.

“Now, the bills are coming due, and they’re looking for a legal framework that allows them to go back on their promises,” he said. “They know that they need to get the court’s blessing on these huge, dramatic changes in pension rights.”

The alternative, Stein said, would be to “go to the citizens of the state as a whole and say, ‘We made these promises but we messed up and didn’t put enough money away, so we need to ask each of you to pay a little more in taxes so that we don’t break them.’”

“The reason we’re seeing these reforms in the first place is that officials haven’t had the courage to do that,” he added.

If the Rhode Island lawsuits are successful, Secunda said, it could make it easier for other courts to reduce protections, and even open the door to future pension cuts.

If Rhode Island is given legal authority to “renege on promises made to workers,” you “can be sure that other states are going to try to go down the same path,” Secunda said. “Right now, we’re waiting for the other shoe to drop.”

In the meantime, George Glover, the retired Rhode Island state worker, said that he was fully conscious of the implications of the lawsuits. “Our whole system of economics in America is based on trust and contracts,” he said. “I just think that to allow the state to get out of its promises like this runs against that entire idea.”

 

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