Federal court rejects lawsuit over retiree cost-of-living increases

Posted June 24, 2013, at 2:37 p.m.
Last modified June 24, 2013, at 5:21 p.m.

AUGUSTA, Maine — A federal judge has rejected a lawsuit by three unions representing public employees in Maine who claimed a 2011 act of the Legislature eliminating cost-of-living increases for retirees was illegal and in violation of the state and U.S. constitutions.

In addition to validating the Legislature’s action, Monday’s ruling closed the door on the plaintiffs’ demand that cost-of-living increases be paid retroactively. A union official said Monday that her organization was considering an appeal.

Tim Woodcock, who represented the Maine Public Employee Retirement System in the suit, said the ruling would save the system — and by extension state government — up to $1.7 billion between now and 2020.

“This is a significant decision in a lot of respects,” said Woodcock. “From a fiscal perspective it’s a significant decision and it’s significant that the court had to consider whether the pension system was a statutory contract.”

U.S. District Court Judge George Z. Singal ruled on Monday that plaintiffs in the case, including three major labor unions and the Maine Association of Retirees, failed to prove that the Legislature violated the Maine Constitution by eliminating cost-of-living adjustments for retirees. He dismissed the case in a summary judgment, which means he didn’t find enough evidence favoring the plaintiffs to send the case to trial.

The unions claimed that the elimination of annual increases to keep up with inflation represented unlawful taking of property without just compensation.

The Maine State Employees Association, the Maine Education Association and the Maine State Troopers Association later joined the case as plaintiffs. The suit was originally filed against the Maine Public Employees Retirement System in February 2012.

Ginette Rivard, president of the Maine State Employees Association SEIU Local 1989, which represents the majority of state workers, reacted to the judgment with disappointment.

“We are disappointed that [the federal judge] did not agree with our interpretation of the statute,” said Rivard in a prepared statement to union members. “We are studying the decision and considering whether an appeal is appropriate.”

At issue was legislative action in 2011 that eliminated cost-of-living increases for three years and capped cost-of-living increases to 3 percent of the first $20,000 of pension income. The measure saved the state some $48 million during the current biennium.

Woodcock said the suit could have ramifications well beyond Maine because it would have set a precedent that any laws pertaining to retirement funds could have been viewed through a legal lens as a contract.

“There could have been potential national dimensions to this,” he said. “I think the decision was thorough and well-reasoned and that it covered the questions of whether this part of the pension statute constituted a contract.”

Similar articles:

ADVERTISEMENT | Grow your business
ADVERTISEMENT | Grow your business