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Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Thursday, February 20, 2014

******Breaking News: Arizona Supreme Court rules against EORP/PSPRS in Fields case******

That sound you heard this morning was the hole being blown in PSPRS' financial condition.  The Arizona Supreme Court issued its ruling today in Fields v. Elected Officials’ Retirement Plan (EORP) (CV 2011-01744).  See this story, Court's pension ruling could cost Arizona taxpayers millions, by Craig Harris in today's Arizona Republic for more detail.  This ruling means that those retired before SB 1609's reforms went into effect must have their COLA's calculated under the old formula.  This means that these retirees should expect some type of retroactive COLA's paid to them.  A more thorough explanation of the new and old COLA formulas can be found here.

This decision is hardly a surprise as the retirees had a rock-solid legal case, and I expect to see some interesting figures coming from PSPRS as to how this decision affects funding ratios and annual required contributions from employers.  Phoenix and Tucson have already projected budget deficits for the next fiscal year, so this is not good news for them or their law enforcement and fire/EMS personnel.

This is only going to get more interesting as the Hall v. Elected Officials’ Retirement Plan (EORP) (CV 2011-021234) and Parker v. Public Safety Personnel Retirement System (PSPRS) (CV 2012-000456) are decided.  (Whichever one is decided by the Court will set precedent for the other.)  These cases involve active employees who were employed before SB 1609's reforms went into effect.  They are suing not only to restore the old COLA formula when they retire but to also lower the employee contribution rate back to 7.65% and return any excess contributions paid since the rates were raised.  This will have even more dire financial consequences if they win their cases.

These two cases were basically postponed since a loss by retirees would have made the Hall and Parker cases moot.  Now that the retirees have won, this cases are the new, more critical battleground.  Definitely stay tuned.

Additional note: I should have made it clear that, in the same way that there are two cases involving active EORP members and active PSPRS members, there was second case, Rappleyea v. Public Safety Personnel Retirement System (PSPRS) (CV 2012-00040), by PSPRS retirees suing over the same constitutional question as Fields.  The Fields decision will carry over to those PSPRS members who retired before SB 1609 pension reforms went into effect.

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