Cities are pressing for givebacks

Financially strapped communities and states across the country are setting up legal fights with retirees by seeking to take back or alter previously negotiated benefits.
Providence sent out the emergency S.O.S. of a sinking ship, claiming it had been pushed to “the brink of bankruptcy” by a recent court ruling that temporarily blocked the city’s plan to move retirees from city-paid Blue Cross coverage onto the federal Medicare program.
In granting retirees an injunction before trial on the city’s right to enforce such a plan, the state Superior Court said the collective bargaining agreement in the case was a private contract and the city hadn’t established a financial threat sufficient enough to disturb benefits before trial. And the state Supreme Court declined the city’s emergency motion to lift the injunction, leaving Providence to make its case at a Superior Court trial tentatively scheduled for May 21.
In a similar contract-based case, Pawtucket was found to have breached its contract with school retirees when it began sending out “coshare” invoices requiring retirees to contribute to their health-insurance premiums in violation of their CBA. Again, the Superior Court used contract-law principles and said that the municipality can’t alter its terms.
Minnesota, Colorado, Michigan and South Dakota courts are likewise entertaining claims by retirees whose cost-of-living, or COLA, increases have either been suspended, frozen at a fixed rate, or taken away altogether.
While the courts in Rhode Island have at least temporarily put the brakes on unilateral actions by local communities to take back or alter negotiated benefits, there’s no clear trend nationally to indicate on which side the courts will eventually fall on the legality of such efforts.
In the Colorado case the retirees signed documents when they retired, acknowledging that COLA adjustments were subject to change. The Colorado court said that because COLAs are based on a formula that is always changing, a “change” in percentage is not a violation of contract.
On the other hand, appeals courts in California and West Virginia have found that retirees have a right to receive the cost-of-living adjustment that was in place at the time of retirement.
States nationwide are clearly keeping a close eye on each other’s court rulings, but Amy Monahan, a law professor at the University of Minnesota, and nationally recognized in the area of pension law said, “There is no easy test. The courts will decide the issues on a case-by-case basis, and a simple difference in facts, like whether the municipality’s fiscal emergency was foreseeable or unforeseeable, [which] could change the outcome.” That Providence knew about its fiscal instability while it continued to agree to paid Blue Cross coverage would then weigh heavily against it, under Monahan’s view of the law.
The state Superior Court called Providence’s bleak financial condition “a chronic problem that has only gotten worse,” and that it can’t now claim to be taken by surprise.
Unbowed, Providence Mayor Angel Taveras on March 3 renewed his call for retirees to share in the sacrifices he says will be needed to solve the city’s structural budget woes.
“It is time to suspend COLAs for all our retirees,” Taveras said at a meeting with retirees organized by the city.
The mayor proposed a three-point plan that calls for retires 65 and younger the pay a 20 percent coshare on health benefits; retirees older than 65 move to Medicare and a Medicare-supplement plan paid by the city; and temporary suspension of COLAs.
Monahan cautions, though, that COLAs and medical benefits are two very different legal issues. “Even if the court ultimately decides that the benefit is contractually protected, governments have to take the least drastic steps to address underfunded pension systems.”
Michael Brugnoli, a 58-year-old retired Providence police officer who will be put on Medicare at age 65 if the city wins its case, insists he isn’t worried. “On the surface,” he said, “it looks like mostly all things are covered under Medicare that are covered under the present health care. If the city does what it says, pays for the gap coverage, all things will be covered and there will be no changes.”
Brugnoli said that he’s more afraid of the city following Central Falls in declaring bankruptcy than he is of being switched over to Medicare at 65.
A state-appointed receiver for Central Falls eventually won concessions that cut benefits to retirees, imposed givebacks on unions and raised property taxes. Pension benefits will shrink as much as 55 percent for some retirees.
“What leverage do retirees have?” Brugnoli said. “If the city files for bankruptcy, then all deals are off.” &#8226

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