Court hears argument on pension benefit increases

OLYMPIA — The state Supreme Court on Thursday heard arguments over legislative action in recent years to end some pension benefit increases for state and local government employees.

At issue are two actions taken by lawmakers. In 2007, the Legislature repealed pension “gain-sharing” that benefited retirees when the markets were doing well. Then in 2011, lawmakers ended cost-of-living increases for pensions for public employees enrolled in two older pension plans. Lawsuits were filed by various unions and others opposed to the changes, including the Washington Federation of State Employees.

In 2010, a King County judge ruled that lawmakers violated contractual rights by taking away gain-sharing without providing comparable replacement benefits. And last year, a Thurston County judge ruled that the Legislature was wrong to eliminate the annual increase in benefits to retirees.

In 1998, state lawmakers decided pensioners should share the wealth when the state’s Wall Street investments did well, so they established “gain-sharing.” In 2007, the Legislature eliminated the pension bonus, but in exchange, some pensioners received cost-of-living increases, and many qualified for earlier retirement without reducing their pension.

In arguments before the high court on Thursday, the state noted that the statute surrounding gain-sharing very clearly stated that the Legislature reserved the right to change or cut the benefit.

“There was never a promise in the statute by the Legislature that gain sharing would continue forever,” Solicitor General Noah Purcell told the court.

He said the plaintiffs are asking the court “to allow them to cherry pick the parts of the statute that they like, the benefit, and to ignore the parts that they don’t, the fact that it can be terminated.”

James Oswald, an attorney for the plaintiffs, argued that the Legislature could not unilaterally take away a benefit that it promised.

“This isn’t a matter of picking and choosing,” he said. “They granted a benefit, it became a vested contractual right for the people who were working.”

Purcell argued that if the court followed the plaintiffs’ reasoning, the court would go down an “unprecedented road of holding that employee expectations directly contrary to statute can create binding contract rights.”

In the second case concerning cost-of-living increases for employees in older pension plans, the state once again pointed to statutory language that gave the Legislature the option of amending or eliminating what Assistant Attorney General Timothy Leyh called an enhancement to the pension.

“There’s no takeaway involved here at all,” he said. “There was a limited grant of an enhancement, and a termination of that grant pursuant to the terms of the grant, that’s all.”

But Rick Spoonemore, an attorney for members of the retirement plans in question, said that these cost-of-living increases are “a promise to state employees that when you retire, no matter what happens, your benefit will increase at some rate.”

“It’s not an enhancement, as the state keeps calling it, it’s a benefit,” he said.

A state actuary report from August predicts that if the court reinstates both gain sharing and the cost-of-living increases, state pension costs would increase by $616 million, and local governments would see an increase of $720 million from 2015-2017.

There’s no time frame on when the court may rule on the case.

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