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Legislature's Pension Cuts Were Legal, Wash. High Court Rules

Washington Supreme Court justices listen to arguments during a court hearing.
Ted S. Warren
AP Photo
Washington Supreme Court justices listen to arguments during a court hearing.

Washington state lawmakers acted legally when they cut pension benefits for teachers and other public employees in 2007 and 2011, the state Supreme Court ruled Wednesday.

The two rulings, both reversing lower court decisions, carried high stakes for both sides. The pension cuts the high court upheld could save the state more than $10 billion over the next 25 years; an opposite ruling would've forced the Legislature to come up with that money.

But advocates for pension recipients say retired public employees face a future of stagnant benefits. Though some pensioners still may receive cost-of-living adjustments, the increases will be much lower than they would be had the state Supreme Court ruled against the Legislature's cuts.

"Despite increasing costs, it's going to affect [retirees'] standard of living and their ability to maintain dignity as they age," said Mike Watson, vice president of the Retired Public Employees Council of Washington.

At issue was the Legislature's repeal of two benefits it offered to retired teachers, school staff and public employees:

"Gain-sharing": In 2007, lawmakers rolled back a benefit that gave pension recipients a share of any state investments that performed especially well on the stock market.

Automatic cost-of-living adjustments: With state coffers running dry after the financial crisis, lawmakers repealed annual uniform cost of living adjustments, called "UCOLA," for pension recipients in 2011.

In both instances, the court unanimously ruled state lawmakers didn't breech a contract with public employees because the original laws that created both gain-sharing and UCOLAs explicitly gave future legislatures the right to repeal the benefits.

"The [unions'] argument is circular," Chief Justice Barbara Madsen wrote for the court. "Striking down the repeal legislation would reinstate the 1995 UCOLA statute, which includes a provision expressly reserving the right to repeal [the UCOLA]."

Washington Attorney General Bob Ferguson praised the ruling, saying "public employees deserve the pensions they have earned," but adding lawmakers need some leeway to make needed cuts.

"Today’s decisions preserve the rights of public employees to receive the basic pension benefits the Legislature has promised, but make clear that the Legislature has the flexibility to add temporary benefits without being locked into providing them forever, Ferguson said in a statement.

Watson disagreed with the justices' analysis, calling the ruling "disappointing" and "convoluted."

"We did have very high hopes, given the lower court rulings and past court decisions," Watson said.

Kyle Stokes covers the issues facing kids and the policies impacting Washington's schools for KPLU.