Courts in Two States Move To Halt Changes in Pension Systems

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State courts in California and Pennsylvania have moved to stop state officials temporarily from altering teacher-pension plans, at a time when the states are looking to the programs as a source of funds to help balance their budgets.

In California, the State Court of Appeals for the Third Appellate District has ordered state officials to fully fund the state teachers' retirement system or to account for their failure to do so in a legal brief no later than Oct. 11.

Last month, Gov. George Deukmejian cut $211 million from the state's $261-million general-fund subsidy for the teacher-retirement program. The cut in the state's contribution would have "no effect on retirement allowance payments," the Governor said, but would have "an immediate impact" on helping the state finance "other education programs.''

Since January, the Governor has wiped out a $1.5-billion deficit in the state's $26-billion budget.

But although the Governor said the cut would not affect pension pay-ments and urged the legislature to fund the retirement program in the future, teachers' union officials claimed that the loss of funds would place the retirement system in "grave jeopardy." The loss of $211 million in state support constitutes "a threat to the well-being of nearly 200,000 teachers," according to Marilyn Russell Bittle, president of the California Teachers Association. The union filed suit on Aug. 30 to have the money restored.

A 1979 statute requires the state to make annual payments large enough to curb the pension plan's "unfunded liability"--the difference between its assets and its obligations to current and prospective retirees.

The state will file a brief rather than make payment, according to Robert W. Taylor, the Governor's deputy press secretary. The specific arguments have "yet to be worked out," but "the state will defend the Governor's authority to act using the line-item veto," Mr. Taylor said.

Following the filing of the brief, state teachers' groups will have 15 days to give the court their written answer.

Last year, the same appeals court ruled in Valdez v. Corey that the state violated the state constitution by failing to make payments to California's Public Employees Retirement System.

The legislature had initially appropriated the money, but then it rescinded the appropriation, requiring that funds for the retirement system be taken out of the system's reserves, according to Michael R. Feinberg, an associate attorney with the law firm that represents the teachers' union.

In the suit that followed, the court held that "public employees have a vested right in the security and integrity of their retirement system and that there is an obligation on the part of the state to meet its contractually created obligation to fund the program," Mr. Feinberg said.

Hike in Pension Payments

In Pennsylvania, a state-court judge last week barred the state from collecting a 1-percent increase in pension payments from about 200,000 public-school employees. The hike in pension payments had been approved by the legislature as part of its budget package this summer.

The legislature increased the employee-contribution rate to 6.25 percent, an increase from 5.25 percent for public-school employees and from 5 percent for state workers.

Suits were filed in Commonwealth Court by the the American Federation of State, County, and Municipal Employees (afscme) on behalf of state workers and by the Pennsylvania State Education Association (psea) on behalf of school employees.

The school employees' suit claimed that in asking for greater employee contributions without increasing benefits, the state was violating the "contractual rights" of school employees and that the employees were being "deprived of earned compensation," according to George Badner, assistant director of communications for the psea

Presiding Judge James Crumlish has ordered the state to refund to school employees all payments exceeding the 5.25 percent rate in force before the new law took effect in August.

Gov. Richard L. Thornburgh proposed the increased payments in order to decrease contributions by the state. The legislature passed the law this summer.

But while the Commonwealth Court barred the state from collecting increases in contribution payments, the Pennsylvania Supreme Court late last month issued a stay on a similar order from Judge Crumlish in the afscme suit.

The state will proceed to collect the increases from state workers, according to Robert R. Grentzel, a spokesman for the attorney general.

The attorney general's office is now seeking a similar stay from the state supreme court on Judge Crumlish's injunction in the psea suit, Mr. Grentzel said.

In Florida, Commissioner of Education Ralph D. Turlington filed suit to close a loophole in the state's pension system that allows judges and other elected officals to collect pension benefits while still recieving their salaries as public employees.

But a circuit court judge refused to offer the commissioner--who served in the legislature as head of the House retirement committee that wrote many of the pension statutes--a temporary injunction to prevent the first checks from being mailed Sept. 30, according to the state attorney general's office.

(The pension measure was designed originally to let state workers to continue serving on school boards after they retire from their state jobs.)

Mr. Turlington himself is eligible for the benefits during the two years remaining in his term. (The law permits officials over age 62 with 30 years of service to be eligible.)

Vol. 03, Issue 05

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