Release: U.S. Court Of Appeals Rules Public Pension Reforms Enacted Under LePage Constitutional

June 30, 2014 Posted by Maine Heritage Policy Center - No Comments

FOR IMMEDIATE RELEASE
June 30, 2014

U.S. Court Of Appeals Rules Public Pension Reforms
Enacted Under LePage Constitutional

BOSTON – The U.S. Court of Appeals for the First Circuit ruled on Friday, June 27, that public pension reform enacted under Governor Paul R. LePage in 2011 does not violate the Contract Clause of the U.S. Constitution.

The Maine Heritage Policy Center filed an amicus curea (friend of the court) brief in defense of the State of Maine’s pension reform, and is pleased to announce the victory.

“It’s important that Maine be able to keep promises made to civil servants and retirees. Unfortunately, our ability to keep those promises is jeopardized by an unsustainable pension system,” said MHPC Chairman Peter V. Anania. “Maine’s government workers union wanted to block all pension reforms, which would effectively turn Maine into Detroit and leave pensioners high and dry. This ruling protects the smart reforms made to Maine’s unsustainable pension system under Governor LePage, thereby helping Maine keep its promises.”

“We are pleased that the Court has upheld the constitutionality of the pension-reform statute enacted by the Maine legislature in 2011. That measure does not reduce any pension benefits; it simply restricts the extent to which the benefits grow over time. As the Court correctly recognized, there is no basis for concluding that such a modest adjustment in the increase of benefits, enacted in the wake of a severe fiscal crisis, is unconstitutional,” said Gregory G. Katsas, an attorney with Jones Day.

Katsas, who formerly served as the head of the Civil Division of the U.S. Department of Justice, wrote MHPC’s amicus brief.

BACKGROUND:

In 2011, Governor Paul R. LePage and Maine’s 125th Legislature enacted historic public pension reform that reduced Maine’s enormous public pension debt from $4.1 billion to $2.4 billion. This 41% reduction in Maine’s unfunded pension obligation brought the system closer to sustainability by limiting the growth of retirement benefits for retired state employees and teachers.

Following the enactment of Maine’s pension reform law, Maine State Employees Association, Maine Association of Retirees, Maine Education Association, Maine State Troopers Association and various other plaintiffs filed a legal challenge to the law. The plaintiffs argued that pension reform constituted a violation of the Contract Clause.

On Friday, however, the court ruled as follows: “We hold that Plaintiffs, regardless of whether they retired before or after the 1999 amendments, have no contractual entitlement to COLA benefits calculated under pre-2011 law. Therefore, the 2011 amendments did not violate the Contract Clause.”

The Maine Heritage Policy Center is a research and educational organization whose mission is to formulate and promote public policies based on the principles of free enterprise, limited government, individual freedom, and traditional American values. MHPC advocated for the advancement of the pension reforms challenged in this appeal.

The document links below include MHPC’s amicus brief and the Court of Appeals opinion and judgment. For more information, please contact Mr. Katsas by phone at 202-879-3463 or by email at ggkatsas@jonesday.com.