Lawsuit against pension changes could benefit from court rulings in other states

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AUGUSTA — A lawsuit filed this week seeking to overturn public pension reforms passed by the Legislature last year could benefit from two recent court rulings favoring similar complaints.  

The Maine Association of Retirees, an organization representing retired Maine state workers and teachers, filed its lawsuit Monday in Federal District Court in Bangor. The 15,000-member organization is challenging the Legislature’s decision last year to eliminate pensioners’ cost-of-living adjustments for three years and to impose a new cap on cost-of-living increases.

Maine was one of 10 states to implement cost-of-living adjustments to public worker pensions in 2011, according to a recent report by the National Conference of State Legislatures. 

However, the Maine Association of Retirees alleges the reforms break the “solemn contractual commitment” contract clauses of the United States and Maine constitutions that prohibit lawmakers from diminishing a contract. 

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Plaintiffs seeking to overturn pension reforms enacted by New Hampshire and Arizona also deployed the contract clause argument. Both cases sought to overturn lawmakers’ decisions last year, forcing some public employees to increase their contributions toward their pensions.

In a January ruling, New Hampshire District Court Judge Richard McNamara sided with the plaintiffs when the state moved to dismiss the case. Similarly, an Arizona judge ruled that pension changes violated the contract provision in that state because it forced employees to pay more for a benefit that has remained the same.

It remains to be seen whether those rulings will affect the Maine lawsuit. Both rulings were made in the states’ respective district courts, which means Maine and federal courts don’t have to consider them in their rulings. 

However, according to a recent story in Stateline, legal experts are monitoring the rulings because the arguments made in New Hampshire and Arizona could be used to challenge pension reforms made in other states.

States seeking to make pension system changes this year are considering focusing those reforms on new-hire employees to avoid the so-called contract challenge.  

According to the National Conference of State Legislatures, Maine was one of 18 states that made changes to public employee pensions in 2011. Several of those states are facing legal challenges to those reforms. 

In Maine, like in other states, the changes were made to address the system’s $4.3 billion debt. Proponents of the reforms made last year argued that the cost-of-living changes reduced the debt to $2.4 billion. 

The Maine lawsuit asks the court to overturn the cost-of-living adjustment changes, to reinstate the funding and to make the changes retroactive to last year. 

Last year, proponents of the pension reforms said a cost-of-living freeze would save the state $48 million over the current budget biennium. However, a news release from the Maine Association of Retirees reported that the “effect of denying cost-of-living adjustments can be devastating to the purchasing power of retirees’ pensions over a long period of time, at a time in the retirees’ lives when they will not be in a position to replace the losses by returning to work.” 

James Kilbreth of the law firm of Verrill Dana filed the suit on behalf of the retirees. Kilbreth did not return a call seeking comment. 

However, Kilbreth told MaineToday Media earlier this week that he understood that the Legislature was struggling to fund the pension liability. 

“It’s looking for ways to save money however it can,” Kilbreth said. “There are some things they are constitutionally prohibited from doing and there are other ways to save money without breaking their promises to retired public school teachers and workers.”

The suit seeks to represent the 28,000 retired state workers and teachers affected by the changes the Legislature approved last year.

smistler@sunjournal.com

The Associated Press contributed to this report.

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