Arizona court: Employees don't have to pay larger share of state pensions - Ahwatukee Foothills News: Valley And State

Arizona court: Employees don't have to pay larger share of state pensions

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Posted: Friday, February 3, 2012 5:00 pm | Updated: 10:11 am, Tue Feb 7, 2012.

A judge has slapped down efforts by lawmakers to help balance the budget by forcing more than 200,000 state, university and school employees to pay a larger share of pension contributions.

In a ruling released Friday, Maricopa County Superior Court Judge Eileen Willett said when workers were hired they became members of the Arizona State Retirement System. And the judge said the employees were told they would share equally in the cost of keeping that system financially solvent.

Last year, however, lawmakers unilaterally altered the system to have workers contribute 53 percent of the cost, reducing the state's burden to 47 percent. That move was designed to save the state more than $41 million this year.

Willett, however, said that move ignored a provision in the Arizona Constitution which spells out that membership in a public retirement system is a contract and that benefits "shall not be diminished or impaired.''

She acknowledged that nothing in the change reduces what workers would get when they finally retire. But Willett, ruling in a lawsuit brought by members of several unions, said that misses the point.

"Increased costs incurred over plaintiffs' length of employment for receipt of the same benefit negatively impacts the value of the benefit the plaintiffs ultimately receive,'' she wrote. "By paying a higher proportionate share for their pension benefits than they had been required to pay when hired, plaintiffs are forced to pay additional consideration for a benefit which has remained the same.''

In siding with the employees and the unions, Willett rejected arguments by attorneys hired by the state that the fact that the 50-50 split was in effect when these workers were hired does not entitle them to the same treatment as long as they are employed.

They also contended that the interests of the state were more significant than those of any of the more than 210,000 state, school and local government workers affected.

That was based on arguments that a typical employee earning $50,000 a year would see a difference of only $12.41 in each of the 26 paychecks, compared to that $41.3 million savings to the state.

Willett, however, was not swayed.

"The impairment to the contract is substantial, and no significant and legitimate public purpose exists for the breach,'' she wrote.

The ruling is unlikely to be appealed.

Senate Majority Leader Andy Biggs said legislative leaders, anticipating the decision, already have crafted a revised budget for the coming year that will return the employee contribution rates to what they were before last July as well as refund the excess. And Biggs said the spending plan for the new fiscal year also does not rely on the extra cash.

The decision affects not only state workers but anyone else in the Arizona State Retirement System.

That includes all public school teachers and those at community colleges as well as some -- but not all -- university faculty and staff. While the change reduced the employer obligation of those levels of government, the Legislature required them to pass on any savings to the state treasury.

The change in the law -- and the ruling -- also affects counties and cities with employees in the state retirement system. But the law did not require them to send their savings to the state, allowing them to instead pocket the difference.

 

 

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