A court ruling in Minnesota this week on pensions, coupled with a similar ruling in Colorado, may set the stage for other states to try reduce public pensions as a cost-saving measure.
Stories in the New York Times and Wall Street Journal connect the decision made here by Ramsey County Judge Gregg Johnson to dismiss a case challenging pension reductions for retired public workers with the dismissal in the Colorado case.
The Journal said:
While each state has different legal protections for public-worker pension benefits, the rulings “will really have an impact on what other state legislatures choose to do,” said Amy Monahan, a professor at the University of Minnesota law school who has studied legal issues of public pensions. “Even if the rulings are not direct precedent, legislatures will now say, ‘We might as well try it.’ “
And the Times said:
The two court decisions, issued Wednesday, suggest that the legal tide may be changing for public pensioners. The political tide has already turned in some places — in addition to Colorado and Minnesota, South Dakota and New Jersey have also cut cost-of-living benefits for current retirees, and other states have been awaiting legal guidance before doing the same.
Johnson ruled the pensioners challenging the reductions “have not met their burden to show unconstitutionality beyond a reasonable doubt.”
Colorado Judge Robert S. Hyatt, used a different approach, noting that the Colorado law being challenged “did not actually allow the state to remove money from the pension fund and use it to balance the budget,” the story said. Instead, the law required the state to send even more money to the pension fund at the same time that it required retirees to give up part of their benefit, “in order to create a larger pool of investable funds and thus provide for sustainable pension benefits in the future.”
The Journal story notes:
Officials with the Minnesota retirement system said the decrease in the cost-of-living adjustments will reduce projected future benefit costs by $5.9 billion over the next several decades. “Coupled with the beneficial investment gains realized by the pension systems over the last two years, the funding picture for all three systems has improved,” representatives for Minnesota’s three pension funds said in a statement.