Florida Worker Pension Changes Are Legal, Court Rules

Florida’s changes to its public- employee pension system didn’t violate government workers’ constitutional rights, the state Supreme Court ruled in a victory for Republican Governor Rick Scott.

Lawmakers properly moved to change future pension benefits and require workers to contribute to their retirements to save $1 billion and help close a budget shortfall, a divided court concluded in a 48-page ruling today.

Florida lawmakers backed Republican-led changes to the pension system to deal with a $3.6 billion budget gap. They approved a measure requiring workers to contribute 3 percent of their pay and eliminated the system’s cost-of-living adjustment for employees retiring after the law took effect.

Florida law doesn’t bar lawmakers “from prospectively altering benefits for future service” by state workers, the court ruled in a 4-3 decision.

The savings were shifted to the Florida Retirement System, which covers more than 650,000 state employees, saving general fund money for use in other programs. The change saved the state an estimated $1 billion for the 2011 budget year and saved local governments $600 million.

“The court’s ruling today supports our efforts to lower the cost of living for Florida families,” Scott said in an e-mailed statement. “This means even more businesses will locate and grow in our state.”

Salary Cut

Workers argued that the pension-reform measure amounted to an illegal salary cut and a violation of collective-bargaining rights under existing union contracts.

Eleven public employees covered by the $120 billion pension system sued Scott and other Florida officials over the changes to their retirement plan. The employees include members of AFSCME Florida, the Florida Police Benevolent Association and the Florida Education Association.

Alma Gonzalez, an AFSCME attorney and spokeswoman, didn’t immediately return a call for comment today about the pension ruling.

“Balancing the state budget on the backs of middle-class working families is the wrong approach,” Andy Ford, president of the Florida Education Association, said in a e-mailed statement. The group represents the state’s teachers. “We’re disappointed that the state’s highest court said this approach was legal,” Ford said.

Judge’s Order

Judge Jackie Fulford in Tallahassee concluded in March that the pension-law changes violated the state’s agreements with government employees and ordered contributions returned with interest.

The law amounted to an “unconstitutional taking of private property without full compensation and an abridgment of the rights of public employees to collectively bargain over conditions of employment,” Fulford ruled.

The majority of the state’s highest court concluded that Fulford erred in finding that lawmakers didn’t have the power under Florida’s Constitution to change pension laws that apply to government workers.

The state’s pension law “does not create binding contract rights for existing employees to future retirement benefits,” Justice Jorge Labarga wrote in the 22-page majority decision.

Collective Bargaining

The judges also found that there was no evidence that changes to the pension law meant that government worker’s rights to “effective collective bargaining has been abridged or impaired.”

Three Florida Supreme Court justices dissented in the case, arguing that the changes to pension law improperly altered existing contracts and should be struck down.

The revisions “impair vested contract rights, and such impairment is substantial,” Justice R. Fred Lewis wrote in a 19-page dissent.

“All public employees including teachers, first responders, deputies, correctional officers, nurses and social workers” had their contract rights violated by the pension changes, Lewis said.

The case is Scott v. Williams, SC122-520, Florida Supreme Court (Tallahassee).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net; Christine Sexton in Tallahassee at csexton11@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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