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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...

Tuesday, March 28, 2017

PSPRS members: The wheels of justice are slowly turning in the Hall case (updated)

So we can finally see some movement in the Hall case at the Superior Court level.  The Maricopa County Superior Court case, CV2011-021234, shows the first update since June 2015.  On March 24, 2017, an "order of mandate" was filed.  As I always like to point out, I am not a lawyer, so I went to the Online Law Dictionary to get a definition.  Here is how it defines a "mandate":
A Judicial command or precept proceeding from a court or judicial officer, directing the proper officer to enforce a judgment, sentence, or decree. Seaman v. Clarke, 60 App. Div. 416, 69 N. Y. Supp. 1002; Horton v. State, 63 Neb. 34, 88 N. W. 146. In the practice of the supreme court of the United States, the mandate is a precept or order issued upon the decision of an appeal or writ of error, directing the action to be taken, or disposition to be made of the case, by the inferior court In some of the state jurisdictions, the name “mandate” has been substituted for “mandamus” as the formal title of that writ.
The term has different meanings in relation to other legal concepts, but the aforementioned definition appears to be the one relevant to the Hall case, especially when it shows the order came from the Arizona Supreme Court.  This appears to be the official document telling the Maricopa County Superior Court to enforce the judgment in the Hall case.  So what does this mean?  I think this means that there will be court dates set for the litigants to meet and agree to a resolution.  I have put in links in the sidebar to the Hall and Parker cases, as well as the latest Fields case.  As I mentioned in this March 14, 2017 post, the Rapplyea case was settled just 17 days after the first Fields case.  I expect that Parker will follow the same pattern and be quickly settled (for the most part) after Hall is finally resolved.

Speaking of Fields, I have to correct an error from the referenced post.  Here is a comment from a reader about the new Fields case:
The new Fields case revolves around the funding of the old EORP plan which was closed a few years ago not properly 124. The nuts and bolts are that when the plan was closed the legislatures artificially capped the max employer rate at around 27% even though the real rate needed is much higher. He is suing to force the state to pay the real costs and not allow the plan to go insolvent.
So thank you to that anonymous reader for his insight, and I apologize for the incorrect information.  My error is even worse since Proposition 124 does not even cover EORP, so Mr. Fields would have no reason to litigate it.  Here is the relevant portion of the EORP annual actuarial report warning about the future funding status of EORP:

The reversal of some of the provisions in SB1609 due to the Fields decision in 2014 resulted in a significant increase in the contribution rate. The statutory contribution of 23.50% of aggregate payroll was instituted prior to the Fields decision.  We recommend that the 23.5% statutory rate be reviewed to reflect the court rulings regarding benefit provisions.  If pending litigation in the Hall case is ruled in favor of the plaintiffs, contribution rates will increase again next year.  Absent the receipt of increased contributions, the System is expected to run out of money in 13 years.
The retired lives are less than fully funded on a funding value of assets basis, but are much less than fully funded based upon the market value of assets.  It is most important that this Plan receive contributions at least equal to the rates shown in this report
I do not believe that PSPRS has this problem, so the outcome of this case should not affect PSPRS members.  If there will be a constitutional challenge to Proposition 124's replacement of the old permanent benefit increase (PBI) formula with a capped COLA, it will have to come from a PSPRS member.  It is likely that in fiscal year 2017 PSPRS will exceed the 9% threshold that triggered PBI's under the old methodology.  Also, inflation has well exceed the new 2.0% cap on COLA's and is currently running at 2.7% for the past 12 months.  This could provide a lot of incentive for a PSPRS member, active or retired, to challenge Proposition 124.

Of course, we already have a PSPRS member suing over the change, the Parker case, so it will be interesting to see if this issue is brought up when Parker returns to the trial court as that court originally decided in favor of the Hall plaintiffs when it came to the PBI issue for employees active when SB 1609 went into effect.  Parker never went to trial at the Superior Court level and was stayed pending the Hall decision.  This was prior to the passage of Proposition 124, which allowed a one-time exception to the Pension Protection Clause.  The Hall case did not have to consider the Contracts Clause of the Arizona Constitution since Proposition 124 did not affect EORP members, and the Supreme Court panel declined the motion for reconsideration that would have looked at the constitutionality of benefits changes when considered under the Contracts Clause.  I have no idea what could happen with this issue when the trial judge considers it, and it should probably be the subject of a future post.  I suppose worst case scenario would be that the judge in Parker declares the post-retirement benefit changes of Proposition 124 unconstitutional under the Contracts Clause, and the case has to work its way back up to the Arizona Supreme Court again for another decision.  Regardless, it should not affect the highest priority issue for most members, the refund of excess contributions, which should go forward regardless of the status of PBI's and COLA's.

I would recommend that everyone interested in Hall and any future litigation involving PSPRS read  the comments in that March 14, 2017 post.  Some of the information is interesting and may help you plan for the near future.  Of course, we are still waiting for something official from PSPRS, so stayed tuned.


  1. Great update Drop. Just heard from an EORP member their contributions going back to the original amount in 2 to 3 weeks.

  2. Just in: Rates going down to 7.65 April 1st and refunds coming soon.

    Trustees' vote first step towards return of excess contributions

    The Arizona Supreme Court issued its mandate in the Hall v. EORP lawsuit for the Superior Court to begin implementing the remedies afforded by the ruling and it has been determined by the PSPRS Board of Trustees that those remedies will also apply to the Parker lawsuit.

    Therefore, effective immediately by Board action this afternoon, the employee contribution rates for all members hired on or before July 19, 2011, are to revert to the following rates at the beginning of the first complete pay period on or after April 1, 2017, or as soon as practicable for employers after that.

    * EORP (Hall lawsuit): 7.00%
    * PSPRS (Parker lawsuit): 7.65%

    Excess contributions will be returned, but PSPRS is unable to provide an estimated time frame of when that will happen before the parties agree in Superior Court as to the rate of interest, the time period for which that interest applies and the methods for which the contributions may be returned.

    However, reverting the contribution rates to the above amounts is the crucial first step before any excess contributions can be calculated. PSPRS will work with employers to identify members impacted by the Hall or Parker lawsuits.


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