Does the U.S. Constitution protect public workers’ pensions?
November 15th, 2011 at 6:00 am by Ted Nesi under Nesi's Notes
There’s no thornier debate in the pension discussion than the question of whether retirees have legal – and perhaps even constitutional – rights to the full benefits they were originally promised. Los Angeles Times political columnist George Skelton took a look at it in the context of California on Monday, but there’s plenty for Rhode Islanders to learn.
On the one hand, Skelton writes:
In Philadelphia, 224 years ago, some men tucked these words into the nation’s new Constitution: “No state shall … pass any … law impairing the obligation of contracts…”
Those words, squeezed into a very long sentence in Article 1, Section 10, listing powers denied the states, became known as the “contracts clause.” …
As widely interpreted — most importantly by the courts (or so we laymen are told) — the clause means that pensions promised state and local government workers on the day they were hired cannot be reduced without giving them a new compensating benefit.
On the other hand, Chapman University law professor John Eastman tells Skelton:
His reading of two centuries of case law on the contract clause, Eastman says, is that public pension plans can be modified if there’s “a real serious fiscal problem, a dire financial need — and the system is underfunded. Given the circumstances in California, I think we would meet the legal requirement.”
He adds: “Guys in the Legislature made [pension] promises they cannot fund. Making sure that future generations of taxpayers are not held to that obligation is not a violation of the contracts clause.”
Read the whole thing. And speaking of pensions, don’t miss the findings of Target 12′s latest “Probing Pensions” investigation tonight at 10 p.m. on Fox Providence and 11 p.m. on WPRI 12.
Tags: law, pensions, u.s. constitution
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
If that’s the case, I don’t see why every contract the government want to break can’t be argued this way. If you consider bankruptcy, especially regarding cities and towns going bankrupt or close to it, why should they be required to pay those they owe? Certainly those contracts aren’t in the publics best interest if the public decides it can’t pay.
If this is where the interpretation of the Contract’s Clause is going, no contracts will be worth the paper they are written on.
Ted, The “Police Powers” legal theory allowing a state to take drastic action boils down to a state making a similar claim as any company in bankruptcy: Who certifies to the court that the conditions are financially dire enough with no room for further cuts??
I say that because the state (and cities and towns) continue to dole out pay raises, longevity bonuses, gold plated benefit packages, etc. not seen in the private sector. So who certifies to a “court of equity” that every possible measure has been taken such that current pensioners must first take a COLA haircut before current workers take a pay / longevity cut?
Treas Raimondo has made an excellent case that the pension system is a drag on the RI economy, but has not made a case that there is absolutely no wiggle room to make other cuts in the overall RI budget (the GA’s job). Does anyone actually believe that there exists no wiggle room to cut RI expenses?
Thus will the “financially dire” police powers argument hold up when the petition arrives on the US Supreme court docket? When the court asks Treas Raimondo “who certifies the dire conditions”, will there be a pregnant pause? We are betting the future on that one issue.