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South Carolina Workers Lose Appeal of Provision of Pension Reform Law

Public workers in South Carolina have lost their appeal of a provision of the state’s 2005 pension reform law, a federal appeals court said Friday.

The employees were challenging a provision of the law that dealt with the pension contributions of workers who retire but later return to work for the state.

An explanation of the provision that was being challenged and what it means for workers, from Reuters:

A provision of the revised law requires retirees who later return to work to pay into the retirement system, making the same contributions as other employees but without accruing extra service credit for pension benefits, according to court documents.

Before the [pension] overhaul went into effect, retired public employees could return to work and earn up to $50,000 without giving up the right to receive retirement benefits and without having to make more contributions to the pension funds.

Quebec Passes Controversial Pension Reform Into Law

Despite the legal threats of unions and the protests of public workers, Quebec’s controversial pension reform measure passed into law Thursday.

The law, Bill 3, mandate that workers contribute a higher percentage of their paychecks to their pensions. In short, they split the bill 50-50 with municipalities.

More details from CBC:

The bill was passed on Thursday morning at the National Assembly by a vote of 85-28.

The law will force municipal workers and retirees to contribute more to their pensions to offset a $4-billion pension fund deficit.

[…]

Liberal Premier Philippe Couillard defended the reforms during question period in the National Assembly.

“In Quebec, we don’t spend more than what we have,” he said.

“The reality of catching up — there are millions of dollars to get back. We’re doing it with courage, we’re doing what was supposed to be done before. And why are we doing it? We’re doing it for today’s Quebecers and the next generations to whom we want to pass on a Quebec in good financial health,” Couillard said.

Members of the opposition parties groaned when Couillard said the move was to overcome a $5.8-billion deficit.

[…]

Municipal Affairs Minister Pierre Moreau’s reforms passed with just two amendments to the bill.

One was to take some of the burden off retirees when it comes to paying off the deficit.

The second gives municipal workers’ unions and the province more flexibility in contract negotiations.

Bill 3 can be read here.

Memphis Weighs Two Pension Reform Measures

The Memphis City Council meets two times in December, and at one of those meetings they are expected to vote on the two pension reform measures that sit before them.

Details on the reform measures, from Memphis Daily News:

One version is Memphis Mayor A C Wharton Jr.’s proposal that would move new city employees and those with less than 10 years of service to a separate retirement account that equals the unvested employees’ contributions in the existing pension plan plus a multiplier.

The second version, by council member Myron Lowery, would move new city employees only to a pension plan that is the “hybrid” plan Wharton proposed in October for new hires as well as unvested city employees. The hybrid is a combination of a cash balance plan and a defined contributions plan.

The motive behind the reform measures is simple: the city is looking to save money. In particular, it is looking to cut down on its actuarially required contribution, the annual payment it pays to the pension system. From Memphis Daily News:

The city’s target in the new plan is how it affects the city’s annual required contribution toward the pension liability. Joyner estimated that by applying a new pension plan to new hires only, the city saves an average of $2 million a year over 25 years.

There would be more savings on the ARC, as it is called, if the city includes unvested employees with five years or service or up to the 10-year mark, as Wharton has proposed.

“You would have additional savings, but that savings will all be generated by taking benefits from people who are not yet vested in those benefits,” Joyner said.

City Finance Director Brian Collins said the administration is sticking by its recommendation of including unvested city employees as well as new hires.

“If you just stuck with the mayor’s plan, that’s where you get the most savings of $10 million,” he said. “If you just looked at it with five years, it is closer to $3 million or $4 million a year off the status quo ARC.”

The council will hear final readings of the two reform measures during their December 2 meeting.

Jacksonville Poised to Pass Amended Pension Reform Plan

After months of debate, the Jacksonville City Council is as close as ever to passing an oft-amended pension reform bill.

The bill originally was designed to force the city to pay higher annual payments into its Police and Fire Pension Fund. But new amendments will likely force pensioners to shoulder some of the burden, as well.

Details on the new amendments to the bill, from the Florida Times-Union:

One amendment favored by City Council would give the city the power to unilaterally impose changes in pension benefits in three years if there is an impasse between the city and police and firefighter unions in future collective bargaining talks.

Gulliford said that would put Jacksonville in the same posture as other Florida cities.

Another amendment would change the cost-of-living adjustments that current police and firefighters would get for pension benefits earned after a new agreement takes effect. Instead of a guaranteed 3 percent COLA annually, the COLA would float based on Social Security’s cost-of-living index, with a maximum COLA of 4 percent.

That change would reduce the city’s pension cost in years when Social Security is less than 3 percent, but the city’s cost would be higher if inflation pushes that index above 3 percent.

According to the calculations of the Times-Union, the bill, amendments included, is likely to pass a vote by City Council:

Most Finance Committee members previously backed the amendments during an initial round of voting last week.

Though nothing would be final until the full council meets Dec. 9, the votes so far show an emerging majority of council is lining up to approve the pension legislation, albeit with significant differences from the tentative agreement put forward by Mayor Alvin Brown.

In the Rules Committee, the unanimous votes for the amended bill were cast by Bill Bishop, Johnny Gaffney, Bill Gulliford, Warren Jones, Robin Lumb, Don Redman and Matt Schellenberg.

[…]

In addition to the seven City Council members who voted to move forward with the amended bill Monday, the amendments drew support at last week’s Rules-Finance committee meeting from council members Richard Clark, Lori Boyer, John Crescimbeni and Jim Love. City Council President Clay Yarborough also supported the amendments.

That would add up to at least 12 members voting for the bill, which would exceed the 10 votes needed to get a majority on the 19-member council.

The city’s Police and Fire Pension Fund is 43 percent funded.

Judge Sides With Union In Omaha Labor Dispute; City Was Planning to Re-Negotiate Police Contracts With Pension Reform in Mind

Omaha officials were planning on re-negotiating the city’s contract with police officers, and those negotiations were likely to include some changes to pension benefits – one of the city’s top fiscal priorities in 2015 is easing its unfunded pension liabilities.

But a judge ruled last week that the City didn’t provide labor groups with written notice that it would be re-opening negotiations. As a result, the police officers’ current contracts will not expire by the end of the year.

That could make it more difficult for the City to re-negotiate contracts to its liking.

Pennsylvania Lawmakers Mull Taking Up Pension Reform During Lame Duck Session

Tom Corbett has until January 20 before Tom Wolf takes over as governor of Pennsylvania. Corbett has spent the last year pushing for pension reform, but the proposed bills never gained traction in the legislature.

Now, a handful of lawmakers are considering quickly putting together and pushing through a pension reform bill — although the odds of it coming together so quickly are unlikely.

From the Pennsylvania Independent:

There’s still technically time for a final drive to pass legislation near and dear to conservatives. Whether lawmakers and outgoing Gov. Tom Corbett use it or just take a knee is the question.

State Sen. Jake Corman, the new Republican majority leader in his chamber, hasn’t ruled out having session days in the two weeks that fall between new lawmakers being sworn in Jan. 6 and Democratic Gov.-elect Tom Wolf taking office Jan. 20.

But, Corman told the PA Independent on Monday, it’s “highly, highly unlikely” legislation as complicated as liquor privatization or pension reform could be ready to sign before Corbett leaves office.

“We may get them started,” said Corman, a Centre County Republican who chaired the Appropriations Committee before ascending to floor leader earlier this month.

For anything to get to Corbett’s desk before his term ends, the state House would also have to convene, and legislation would have to clear both chambers. There’s time for it to happen, but bills would have to move quickly.

State Rep. Dave Reed, R-Indiana, the new House majority leader, has read about Corman’s comments, but said there have been no discussions in the House about a topic that’s quickly become political water cooler talk.

“It seems like an awful lot of folks are talking about it,” Reed said. “I think more folks outside the building than inside the building are talking about it at the moment.”

State Rep. Fred Keller, R-Snyder, said there has been “scuttlebutt” among rank-and-file lawmakers about the possibility of convening during the two-week period known as interregnum.

Keller would “absolutely” be in favor of it, he said, especially if pension reform is addressed. He also sees the controversial paycheck protection as possible legislation that could arise in the final weeks before Wolf takes over.

At least one lawmaker wouldn’t be on board with pushing through pension reform before Wolf takes officer. From the Independent:

Senate Minority Leader Jay Costa, D-Allegheny, has already sounded alarms that having a session before Wolf takes office would be “inappropriate, unprecedented and inexcusable.”

“The ill-conceived idea to empower and use an unaccountable governor in his last days in office to revive already rejected policies would be viewed as an act of desperation and a serious blow to reform,” Costa said in a written statement. “I would be very surprised if Governor Corbett would allow himself to be used by Republican leadership in this way.”

Illinois Borrowing Costs To Rise In Wake of Ruling Overturning Pension Reform

Illinois already has the lowest credit rating of any state in the country. But it could see its borrowing costs rise further after a court law week overturned the state’s pension reform law.

From Bloomberg:

Illinois bonds are set to weaken after a judge struck down a plan to address the biggest pension deficit among U.S. states, according to Wells Capital Management.

Illinois 10-year obligations yield 3.68 percent, or about 1.4 percentage points above benchmark municipal debt, data compiled by Bloomberg show. At that yield spread, the smallest since July, the debt isn’t attractive given the legal developments and the potential financial strain, said Robert Miller, who helps oversee $35 billion of munis at Wells Capital.

The lowest-rated U.S. state plans to appeal the Nov. 21 ruling that its constitution protects cuts to public pensions, which face a $111 billion shortfall. The decision marks the latest challenge to emerge for the incoming governor, Bruce Rauner, who takes office Jan. 12. He also has to grapple with a $2 billion budget hole from expiring increases to income-tax rates.

“You would expect on this news that spreads would widen out,” said Miller, who’s based in Menomonee Falls, Wisconsin. “The pension is definitely a looming problem and something they need to deal with.”

Some Illinois bonds weakened after last week’s pension decision. Taxable debt maturing in June 2033, the state’s most frequently traded securities, changed hands Nov. 21 at yields as high as 5.42 percent, Bloomberg data show. The debt’s spread to Treasuries was about 0.3 percentage point more than the average for the past five months.

If history’s any guide, the court decision will keep inflating the state’s relative borrowing costs. In July, Illinois yields surged after a separate court ruling signaled the 2013 pension fix might be in jeopardy. The law would save an estimated $145 billion over 30 years by reducing cost-of-living adjustments and raising the retirement age.

The state is appealing the circuit court’s decision to the Supreme Court.

Judge: Illinois Pension Reform Law Is Unconstitutional

A Circuit Court judge ruled Friday afternoon that Illinois’ sweeping pension reform law is unconstitutional.

Judge John Belz said in his ruling that the Illinois constitutional makes a promise to protect employee pension benefits.

The ruling will be appealed and will soon head to the state Supreme Court.

From Crain’s Chicago Business:

Sangamon County Circuit Court Judge John Belz ruled today that the state’s pension reform law is unconstitutional, setting up an immediate appeal to the state’s highest court.

“The State of Illinois made a constitutionally protected promise to its employees concerning their pension benefits,” Belz said in his seven-page ruling. “Under established and uncontroverted Illinois law, the State of Illinois cannot break this promise.”

While the state lost this round, the constitutional question ultimately has to be resolved by the Illinois Supreme Court. The longer the case takes to get there, the longer state finances remain in limbo and the longer any “Plan B” for pension reform goes undiscussed.

“Seven people will decide this at the end of the day,” said Illinois Sen. Daniel Biss, D-Skokie, one of the principal co-authors of the pension reform law. “It’s a victory for the state to get it to the Supreme Court faster. The state suffers from uncertainty. Ultimately what matters most is how we resolve this problem eventually.”

The decision was widely expected, given the state Supreme Court’s ruling in Kanerva vs. Weems, a similar case in July testing whether retiree health care benefits can be reduced. The justices ruled that the state constitution’s pension protection clause is “aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.”

Proponents of the reform law called today’s ruling “significant”, but not a be-all-end-all judgment by any means. That’s because the Illinois Supreme Court, who will hear arguments on the law at some point in the coming months, will have the final say.

The state has 30 days to appeal the ruling up to the Supreme Court.

First Ruling on Illinois Pension Reform Law Expected Friday

Sangamon County Judge John Belz spent Thursday hearing arguments for and against Illinois’ major pension overhaul.

On Friday, he is expected to release his ruling on the law. If he declares it unconstitutional, the debate could move to the halls of the Supreme Court sooner than later.

Rhode Island Pension Reform Law Sits in Legal Limbo on Three Year Anniversary – But Raimondo, Other Lawmakers Open To Settlement

It’s been three years since Rhode Island passed into law a sweeping pension reform measure. But the law still sits in legal limbo after being challenged by labor groups.

A settlement has been hard to come by. But incoming Rhode Island governor Gina Raimondo said Monday she is open to a settlement. From WPRI:

Raimondo – who initially resisted efforts to mediate, but ended up supporting the failed settlement after a judge ordered talks – suggested Monday she remains open to settling but only if she can preserve the lion’s share of the savings from the original 2011 law. The previous settlement reduced the state’s pension shortfall by $3.86 billion, about 94% of the $4.09 billion the law saved.

“As I have said numerous times, I supported the settlement agreement,” Raimondo told WPRI.com in a statement. “I would like to see that back on the table and enacted to put the lawsuits behind us. I am open to making that happen.”

But Raimondo added: “What I am not interested in is going backwards from what was agreed upon in the settlement.” The state is already projecting a budget deficit of nearly $200 million next year; it would be more than twice as high if the old pension system were still in place.

She isn’t the only Rhode Island lawmaker eager to settle and put the legal challenge behind them. From WPRI:

Seth Magaziner – the Democrat newly elected to succeed Raimondo as treasurer, who will therefore become a lead defendant in the pension suit – has long backed seeking a deal.

“I continue to be supportive of renewing settlement talks, and am hopeful that a resolution can be reached that will keep the retirement system on a secure footing and avoid lengthy and expensive litigation,” Magaziner told WPRI.com in a statement Monday.

Legislative leaders are also open to the possibility.

House Speaker Nicholas Mattiello and Senate President M. Teresa Paiva Weed have both signaled in recent days they want to reduce or eliminate taxes on retirement income, such as Social Security and pension benefits – a new perk for older residents that could help smooth the way for settling the pension suit.

“The speaker will work with all parties to help facilitate a settlement of the pension lawsuit that is in the best interests of the citizens of our state,” Larry Berman, a spokesman for Mattiello, told WPRI.com in an email Monday.

Paiva Weed spokesman Greg Pare sounded a similar note. “The Senate worked closely with Treasurer Raimondo to develop the Rhode Island Retirement Security Act, and will continue to work with her as governor,” Pare told WPRI.com in an email Monday.

The pension reform law froze COLAs and moved most employees into a hybrid system with 401(k) qualities. An actuarial analysis stated the reforms improved the funding level of the state’s pension system from 42 percent to 56 percent.

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