State lawmakers cannot balance the budget by limiting pension benefit increases for retired judges, the Arizona Supreme Court ruled Thursday.
The justices said a voter-approved section of the state constitution makes public pension plans a contractual relationship. More to the point, that provision says benefits “shall not be diminished or impaired.”
Justice Robert Brutinel, writing for the unanimous court said that language applies not just to what retired judges were getting at any one time. He said it also means lawmakers cannot tinker with already existing formulas that determine how much those benefits will increase each year.
Thursday’s ruling puts a damper on efforts by legislators to sharply restrain the obligations of the state to finance existing public pensions. But it does not bar lawmakers from setting new rules for those who have not yet become judges.
Judges are members of the Elected Officials Retirement Plan.
Beginning in 2000, EORP’s ratio of assets to liabilities began to decline, at least in part because of lower returns on investments. Despite that, fund managers allowed retired members to receive a 4 percent benefit increase each year.
In 2011, though, lawmakers, with the blessing of Gov. Jan Brewer, enacted a formula for calculating benefits that resulted in just a 2.47 percent benefit increase that year and no increases in 2012 and 2013. And that same law contains other calculations which could constrain future benefit increases to less than 4 percent.
Several retired judges sued. When a trial judge sided with them, the state sought Supreme Court review.
Brutinel rejected the state’s arguments that the constitutional provision protecting “benefits” shields only the actual amount they were receiving, not any increase.
He pointed out that a state law enacted even before the voter-approved constitutional amendment said that retirees are “entitled” to receive benefit increases.
Potentially more significant, Brutinel said the pension plan approved by the Legislature never promised to pay a specific dollar amount.
“Rather it has provided a formula by which the promised amount is calculated,” he wrote.
Looking at this case, Pelander said if lawmakers had not enacted those 2011 changes, judges would have received 4 percent benefit increases in each of the last three years. And he said the legislatively mandated changes in calculating future benefit increases make it less likely retired judges will get 4 percent increases in future years.
Brutinel acknowledged that he and the other four justices — as are virtually all judges in Arizona — are members of EORP and will be entitled to pensions when they retire. But he noted that none of those involved in the case asked any of them to recuse themselves from hearing the case.
Anyway, he cited the “rule of necessity.” It says a judge who otherwise would be disqualified from hearing a case has to hear it if there are no other qualified judges available to allow parties to get a ruling on their legal issues.