The high-stakes legal dispute over Rhode Island's public retirement overhaul faces a key court date Friday when attorneys for the state will ask a judge to dismiss a challenge from public-sector unions unhappy with the sweeping pension changes.
The unions argue the state is reneging on promised benefits and that lawmakers should have explored alternatives or negotiated concessions with workers before approving the pension law in 2011. State leaders insist that without the changes, ever-escalating pension costs would swamp state finances.
The lawsuit is being watched closely across the country as states seek to rein in pension costs. Collectively, states face a $1.4 trillion gap between what they've promised workers and what they've set aside to pay for those benefits.
Superior Court Judge Sarah Taft-Carter will hear arguments from both sides as she considers the state's motion to dismiss the unions' legal challenge. A ruling on the motion is not expected immediately.
The new law is intended to save an estimated $4 billion over 20 years by suspending retiree pension increases, raising retirement ages for many workers and creating a new benefit plan combining traditional pensions with 401(k)-style accounts. Before the changes were enacted, the state's pension costs were set to jump from $319 million in 2011 to $765 million in 2015 and $1.3 billion in 2028.
The changes were signed into law by Gov. Lincoln Chafee a year ago and went into effect July 1. They affect 66,000 active and retired state workers, teachers and municipal employees.
Attorneys for the unions and the state agree the legal dispute is likely to be protracted, expensive and complicated. Chafee, one of the leading supporters of the law, now says he would like to negotiate a settlement with the unions to avoid the fiscal calamity that a defeat for the state would mean.
Treasurer Gina Raimondo, the main architect of the law, said she feels confident about the state's chances. She opposes negotiations with the unions at this point.
"We're in the early innings," Raimondo, a Democrat, said of the case. "The law is in our favor and we have an excellent legal team. We're going to do our very best to protect the work of the General Assembly."
The unions, however, argue that the pension law is an unconstitutional impairment of contractual right. They insist lawmakers had a duty to look for alternatives before voting to withhold pension benefits that had already been promised.
"They didn't even listen to us," said J. Michael Downey, President of Council 94, a union representing several thousand active and retired public workers. "We've been willing to sit down and resolve this but our ideas weren't listened to."
Also on Friday, the state will ask that high-profile attorney David Boies be allowed to practice in Rhode Island. He has offered to represent the state in the pension lawsuit for $50 an hour — a fraction of his typical fee. Boies, who is famed for his work representing the government in its antitrust case against Microsoft and in Al Gore's unsuccessful presidential campaign challenge in the U.S. Supreme Court, has said he's interested in the case because of its implications for governments around the nation.
The state had asked the Rhode Island Supreme Court to review Taft-Carter's participation in the case because her mother and son receive state pensions. On Thursday, the high court declined to intervene.