Rhode Island Lawyers to Suss Out How Court Should Handle Pension Lawsuit

Rhode Island

At the end of this week, the lawyers representing Rhode Island and its retirees will meet with a Superior Court judge to discuss a major point of contention in the pension lawsuit brought against the state: how many trials should be held?

Lawyers for retirees argue that the lawsuit should be separated into multiple trials.

But the state, citing cost, is arguing for one trial.

More from the Providence Journal:

Lawyers for the Rhode Island Public Employees Retiree Coalition are pleading for a separate jury trial on their bid for reinstatement of their annual “cost-of-living adjustments,” which they see as the potentially more winnable case.

[…]

The state’s lawyers said separating the cases could put the state — and by extension, the state’s taxpayers — at a potential legal, tactical and financial disadvantage.

“If the retiree cases were tried first,’’ they said, “the evidence that would be submitted would include not just… the facts, circumstances and legislative changes pertinent to the retirees, but also all the evidence concerning… the reforms in 2005, 2009, 2010 as well as 2011… the evidence of how, and why, each separate group was addressed in each set of the legislative changes… and the reasonableness and necessity of the changes impacting each group under the totality of the circumstances facing the state.’’

Beyond that, “Governor Raimondo and former Governor Chaffee [sic] would have to testify at multiple trials, given that they were the Treasurer and Governor, respectively, at all times relevant to these cases… This would prevent the Governor from attending to her official duties [if] she had to testify multiple times.’’

In fact, “all the [defendants’] witnesses would have to testify multiple times, including expert witnesses, at great expense to the State Defendants and the public fisc.”

Rhode Island is being sued by over 100 retiree and labor groups for its 2011 pension reforms, which raised the retirement age, suspended COLAs and shifted new workers into a 401(k)-style hybrid plan.

 

Photo credit: “Flag-map of Rhode Island” by Darwinek – self-made using Image:Flag of Rhode Island.svg and Image:USA Rhode Island location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Video: Raimondo Talks Pension Settlement, Defends 2011 Reforms

In this interview, new Rhode Island Governor Gina Raimondo discusses the amount of fees the pension system pays to Wall Street managers and defends her pension reforms (2:00 mark); she also talks about a possible settlement with the retirees suing the state over those reforms (3:20 mark).

 

Photo by By Jim Jones (Own work) [CC BY-SA 3.0]

Raimondo Seeks Pension Settlement, But Has “No Interest” In Negotiating Changes to Reforms

Gina Raimondo

Rhode Island Gov. Gina Raimondo said during an interview Wednesday that she is still hoping for a settlement with public workers in the lawsuit over the state’s 2011 pension reforms.

But while she is willing to settle, she has “no interest” in re-opening negotiations on the reforms.

From NBC 10:

She said during a taping of “10 News Conference” that she is pushing to have pension reform settled, but she is not calling for negotiations.

Raimondo and other state leaders have said they would like to see the pension reform lawsuit settled out of court, and a deal was negotiated that was approved by a majority of the unions involved. But one unit rejected it, scuttling the deal.

The incoming governor says that deal is the best that she will agree to. When the agreement was announced nearly a year ago, she said it preserved the bulk of savings for taxpayers. And as far as she is concerned, while she would prefer to have all sides agree to those terms, she is not willing to offer unions and retirees anything better.

“I have no interest in changing the terms of that,” Raimondo said. “Otherwise, we can go forward with the litigation. The state has a very strong case. But it’s in everyone’s interest to have some finality.”

Raimondo said she will reach out to all the parties to try to reach agreement, but admits it may not be possible. But it’s something she’d like to get finalized soon.

The state’s 2011 pension reforms were especially controversial because they applied to all workers and retirees, not just new hires.

 

Photo by By Jim Jones (Own work) [CC BY-SA 3.0]

Newspaper: Rhode Island Should Settle Pension Suit With Retirees, But Keep Savings Intact

Gina Raimondo

Rhode Island Governor-elect Gina Raimondo said last week that one of her top priorities was reaching a settlement with workers in the long-running lawsuit against the state’s 2011 pension reforms.

The Providence Journal opines that a settlement would be ideal for everyone – if the law’s savings are kept intact. From the Providence Journal:

State leaders — led by Governor-elect Gina Raimondo — are again eyeing a possible settlement with the unions that are challenging the 2011 overhaul in court. The state’s goal, presumably, is to retain the bulk of the savings created by the overhaul and avoid the risk of losing — an outcome that could cost taxpayers hundreds of millions of dollars that they cannot afford.

That goal is a good one, as long as the bulk of the overhaul savings is retained. Even with those savings, the state’s public pension costs are high, and those tax dollars pay for retirement plans that are often far more generous than those in the private sector.

There is also the issue of uncertainty. The projection that the taxpayer contribution rate will slowly nudge downward assumes that the state’s $8 billion pension portfolio will meet its annual investment goal of 7.5 percent. If that goal is reached or exceeded, all well and good. But if the investment returns fall short, the cost to taxpayers could rise.

The idea of reaching a settlement also raises logistical concerns. There are more than two dozen communities enrolled in the state-run Municipal Employees Retirement System, which will be impacted by the outcome of the pension lawsuit. Naturally, most if not all of these municipalities will want to have a say in any negotiated settlement.

If a settlement is reached, it could look a lot like the one that was almost accepted in 2014. In that deal, 95 percent of the state’s savings were retained. In exchange, pension increases were given to retirees and some employees.

But that deal fell through when one retiree group rejected it.

 

Photo by By Jim Jones (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Settling Pension Lawsuit Is Top Priority for Raimondo

Gina Raimondo

When Rhode Island Governor-elect Gina Raimondo takes office this month, one of her top priorities will be negotiating a settlement with public employee unions in the lawsuit challenging the state’s 2011 pension changes.

From the Providence Journal:

Days away from taking the oath of office that will make her the first female governor of Rhode Island, Governor-elect Gina Raimondo anticipates that public-employee pensions will be one of the first big items she tackles. Again.

Specifically, she anticipates “early” action to try to forge a settlement in the state’s high-stakes legal fight with its public-employee unions over the 2011 pension overhaul she crafted as state treasurer. “It is a priority,” she said.

[…]

With the state already facing a potential $200-million deficit, she said: “It is in no one’s interest to have a pension system which is unaffordable and unsustainable because, if you do that, a lot of people will get hurt.”

“So I will be reaching out,” she said Wednesday in a brief but wide-ranging interview in which she confirmed her intent to try to reopen the pension talks and, in the interim, ask lawmakers to extend the Feb. 5 deadline for the submission of her first budget proposal.

[…]

“A lot of work and good will went into the terms of the settlement agreement,” said Raimondo, who hopes to revive it. “It gives them peace of mind that their pension will be there … and that it is affordable for the state of Rhode Island.”

Should the state lose the lawsuit, “there would almost certainly be a number of municipal bankruptcies … [and] if we don’t fix the system, eventually you are going to have to go to retired people and cut their pensions … and that would be a terrible thing.”

Raimondo spearheaded the state’s 2011 pension changes, which cut benefits, froze COLAs and raised the retirement age.

 

Photo by By Jim Jones (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Former Enron Trader Continues to Fund Pension Policy Reforms From Behind the Scenes

one dollar bill

Former Enron trader John Arnold has given large amounts of money to various public pension reform initiatives around the county in recent years.

Many of those measures mandate a shift to a 401(k)-style system, or allow benefit cuts.

Most recently, he gave $1 million in support of Proposition 487, a Phoenix ballot measure that would have shifted new city hires into a 401(k)-style system.

From Politico:

When former Enron trader and Texas billionaire John Arnold donated more than $1 million to a November 2014 initiative to reform the public pension system in Phoenix, Ariz., pension activists took notice.

Arnold’s donation to Proposition 487, also known as the Phoenix Pension Reform Act, constituted close to 75 percent of total donations for the ballot measure, which failed. Had it passed, it would have moved new state employees from a defined benefit plan into a less-generous (and less expensive) defined contribution plan such as a 401(k).

Despite his Arizona defeat, no one believes Arnold is done.

Arnold’s money has also been involved in reform initiatives in Kentucky, Rhode Island and California. From Politico:

In the 2014 cycle, Arnold and his wife donated $200,000 to a super PAC that supported Democrat Gina Raimondo’s successful gubernatorial campaign in Rhode Island. As Rhode Island’s state treasurer, Raimondo had enacted pension benefit cuts that cost her union support. Rahm Emanuel, who made similar changes to Chicago’s pension system, also received financial assistance from Arnold.

San Jose Mayor Chuck Reed, another Democrat, tried, unsuccessfully, to place an initiative on California’s November 2014 state ballot that would have allowed public employers, under specific circumstances, to reduce employee benefits and to increase contributions to underfunded plans. Arnold bankrolled the entire effort, to the tune of $200,000.

According to data compiled by the NPPC, based on donations disclosed on the website of the Laura and John Arnold Foundation and on news articles, Arnold has since 2008 spent more than $53 million on pension policy reforms, not all of it in the political realm. (In an email interview with Reuters, Arnold disputed those numbers.)

Other beneficiaries listed include universities and think tanks such as Brookings and the Pew Research Center. Much of the money was spent to support pension reforms, but some was spent on education reform. Both efforts, unions point out, tend to favor benefit cuts to public employees.

[…]

The Arnold Foundation is also participating in the Colorado Pension Project, chaired by former Colorado governors Bill Owens, a Republican, and Richard Lamm, a Democrat. As governor, Lamm drew national headlines 30 years ago when he said that elderly people who were terminally ill had a “duty to die and get out of the way.” (Lamm will turn 80 next year.) The Colorado Pension Project’s website says that recent legislative reforms to the state pension system — which reduced cost of living adjustments, raised the retirement age for new employees and increased employee salary contributions — did not go far enough. McGee said Arnold’s foundation was drawn to the state’s history of “fruitful left ideological discussions.”

Read the full Politico report here.

 

Photo by c_ambler via Flickr CC License

Rhode Island Pension Payments to Total Over $400 Million in FY 2016, 2017 As New Contribution Rates Approved

Rhode Island flagRhode Island’s Retirement Board approved employer contribution rates for fiscal years 2016 and 2017 on Wednesday.

Total state and local pension payments are projected to top $400 million in those years, just as they did in 2015.

From the Providence Journal:

New contribution rates approved by the state Retirement Board on Wednesday will require state and local payments into the pension fund of a projected $171.2 million for state employees, and $237.3 million for teachers during the budget year that begins on July 1, 2016.

At those projected payment levels, state and local taxpayers will pay a total of $408.5 million in fiscal year 2017, compared with a potential $411.6 million during the budget year beginning July 1, 2015, according to information the state’s actuary provided the Retirement Board chaired by General Treasurer and Governor-elect Gina Raimondo.

[…]

While most state employees are now required to contribute 3.75 percent of their pay toward their reduced defined-benefit pensions, the actuaries recommended the state share go from 23.65 percent of payroll to 23.78 percent come July 1, 2016.

And while teachers also contribute 3.75 percent of their pay, the state — and the communities that employ them — would pay 22.76 percent of payroll, compared with 23.14 percent a year earlier. (The drop is a result of a lowering of earlier projections of potential teacher salaries.)

The net result: the required contribution to teachers’ pensions will drop from a projected $241,742,873 in the new budget year that begins on July 1, to $237,251,068 the following year, while rising for state employees from a projected $169,811,685 to $171,169,925.

Rhode Island’s pension system for general state employees was 57 percent funded as of June 30. The teachers’ system was 59.6 percent funded as of June 30.

 

Photo credit: “Flag-map of Rhode Island” by Darwinek – self-made using Image:Flag of Rhode Island.svg and Image:USA Rhode Island location map.svg. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Jury Will Hear Rhode Island Pension Lawsuit; Trial Set for April

Rhode Island map and flagA Rhode Island judge sided with the state on Tuesday when she ruled that a jury will hear the lawsuit over the state’s 2011 pension reforms.

More details from WPRI:

Taft-Carter said that while she disagreed with state lawyers’ arguments that they had a constitutional right to a jury trial in the pension case, she would use her discretion to grant a jury trial in light of what she said is the Rhode Island Supreme Court’s long-stated preference for using juries.

“Being mindful of the importance of a jury trial in this country, and our Supreme Court’s expressed preference in favor of having questions of facts to be tried before a jury even where equitable claims are involved, the court is satisfied that these cases should be properly tried before a jury,” Taft-Carter said from the bench.

[…]

R.I. Superior Court Judge Sarah Taft-Carter read her lengthy decision about the jury trial from the bench Tuesday morning at Newport County Superior Court, where she is currently assigned to hear cases. She announced the trial date after conferring with lawyers from both sides in a closed-door status conference.

At stake is whether Rhode Island legislators acted constitutionally three years ago when they reduced future retirement benefits to shave roughly $4 billion off the shortfall in the state’s pension fund for government workers and taxpayers.

Reactions from lawyers on both sides of the case:

John Tarantino, a lawyer for the state, said he was pleased by Taft-Carter’s decision but that it was too early to say when jury selection would take place or how many jurors there would be. “We think a jury should decide it,” he told reporters. “I’m a big believer in jury trials.”

Lawyers for the union plaintiffs declined to comment on the state’s legal victory Tuesday.

[…]

Tarantino and the other lawyers representing Gov. Lincoln Chafee and General Treasurer Gina Raimondo argued in court filings that the state, as a defendant, has a constitutional right to a jury trial and should be allowed to have jurors decide the case, rather than just Taft-Carter ruling on her own. The lawyers representing the unions and retirees opposed the idea, saying it didn’t fit the legal issues at hand.

The state’s 2011 pension reforms were especially controversial because they applied to all workers and retirees, not just new hires.

Ruling on Jury Trial for Rhode Island Pension Lawsuit Could Come This Week

Judge Sarah Taft
Judge Sarah Taft

Will it be a jury or a judge deciding the legality of Rhode Island’s 2011 pension reforms?

That’s a question that could be answered as soon as tomorrow, when a judge will decide whether to grant the state’s request for a jury trial in the long-running lawsuit against the state’s pension reforms.

From the Providence Journal:

The lawyers in the state’s high-stakes pension case are headed back to Superior Court on Tuesday to hear Judge Sarah Taft-Carter’s anticipated decision on whether to let a jury decide the legality of the state’s sweeping 2011 pension overhaul.

[…]

The treasurer, the governor and the state retirement system have requested a jury trial in the long-running fight over the legality of pension cuts that Governor-elect Gina Raimondo crafted — and shepherded to passage in 2011 — in her current role as state treasurer, and earlier cost-cutting moves dating to 2009.

The phalanx of unions that filed the central lawsuit in June 2012 contend the cutbacks — which include the temporary suspension of the annual “cost-of-living adjustments” (familiarly known as COLAs) for retirees — are illegal.

Even though the pension benefits at issue are dictated by state law, not contract, the unions argued — and Taft-Carter agreed as a starting point for the case — that there was an implied contract.

The defendants want a jury, not a single judge, to decide whether the 2011 rewrite of state pension law impaired a contract, whether the impairment was substantial and “whether there was a legitimate public policy purpose behind the legislation that is sufficient to justify the impairment of the alleged contractual rights.”

Even if the plaintiffs who brought the six linked lawsuits establish “beyond a reasonable doubt a substantial impairment of a contractual relationship,” the state’s filing says: “It must be decided whether there is a legitimate public purpose behind the government action and whether that purpose is sufficient to justify the impairment of contractual rights.”

But a lawyer for the plaintiffs, Douglas L. Steele, told the court at an earlier juncture that the case isn’t about monetary damages. The unions want the court to use its discretion and injunctive powers to put the law back the way it was.

Carly Beauvais Iafrate, an attorney representing about 7,000 retirees, said: “We’re asking you to reinstate our benefits as they existed on June 30, 2012. That means we are asking you to take the law and just put it back. That, to me, is equitable.”

In short, the lawyers for the unions — and the retiree groups — that filed the legal challenges contend: “There simply is no right under Rhode Island law to a jury for impairment of contract claims” or any of the other alleged violations of the “takings” and “due process” clauses of the Rhode Island Constitution.

The state’s 2011 reforms applied to all workers and retirees, not just new hires. The changes included suspending COLAs and moving employees into a hybrid pension plan with elements of a 401(k)-plan.

Rhode Island Pension Investment Board Reviews Hedge Fund In Closed-Door Meeting

Rhode Island flag and mapRhode Island governor-elect Gina Raimondo and the state Investment Commission held a closed-door meeting last week to review a particular hedge fund, Mason Capital, in which $61.7 million of pension money is currently invested.

The exact reason for the meeting, and what was said during, is unknown because the session was exempt from the state’s Open Meetings Law.

The minutes of the meeting are sealed to “protect the interest of the state’s pension fund”, according to a Raimondo spokesman,

More from the Providence Journal:

Asked to explain [the meeting], Raimondo spokesman Ashley Gingerella-O’Shea drew attention to the exemption that the state’s Open Meetings Law provides for any “matter related to the question of the investment of public funds where the premature disclosure would adversely affect the public interest.”

The state has had an investment in Mason Capital since January 2012 that has increased in value by an average of 1.02 percent per year in the nearly three years since, according to an Oct. 31 report to the investment commission.

It was one of the hedge funds in which Raimondo, a former venture capitalist, invested an overall $1.176 billion in a controversial shift in strategy that figured prominently during her heated primary and general election campaigns. Her opponents keyed their criticism to the sharp increase in state-paid investment fees since she took office.

When pressed, Gingerella-O’Shea sent a further statement on Monday that said the investment commission “reviewed the calendar year-to-date performance” of all of the state’s hedge fund investments during the open portion of last Wednesday’s meeting.

[…]

But a review of the last online Investment Commission report indicates the value of the state’s investment in Mason Capital dropped by about $4.7 million during October, from $66.4 million to $61,751,634.

While the market value of some of the state’s other “global equity hedge funds” dropped in October, none dropped this much.

The closed portion of the meeting was only a segment of a larger, open-to-the-public discussion on the year-to-date performance of the pension system’s hedge fund investments.

The Mason Capital fund returned around 1.02 percent annually over the last three years. Meanwhile, the state pension system’s hedge fund portfolio has averaged returned of 6.9 percent over the same time period.