April 30th, 2015
Statement from Greg Hartman
Bennett, Hartman, Morris & Kaplan LLP (PERS Coalition Attorneys)
Today, the Oregon Supreme Court, in the case of Moro v. State of Oregon, held that most of the changes to PERS Cost of Living Adjustments (COLA) made by the 2013 legislature, including those that were part of the grand bargain, unconstitutionally impaired PERS members’ contract rights.
At issue in the Moro case was $5.3 billion dollars in benefits for PERS members and retirees. The Supreme Court’s decision finding the SB 822 and SB 861 reductions to COLA unconstitutional for benefits earned before the effective dates of the changes means that over $4 billion of the $5.3 billion in benefits at issue have been protected. This represents a significant victory for PERS retirees and members.
The court affirmed the changes to the 1991 (SB 656) and 1995 (HB 3349) income tax offsets for out of state retirees and to COLA for benefits that members earn on or after the effective dates of SB 822 (May 6, 2013) and SB 861 (October 8, 2013). What this means for active Tier 1 and Tier 2 members is that their COLA benefits can be changed for future service like they can be for OPSRP members under ORS 238A.470. However, as noted above, the vast majority of the Tier 1 and Tier 2 COLA benefits have already been accrued and are protected. Therefore, active members will receive the 2 percent COLA for that part of their service before May and October of 2013, and the SB 822 and SB 861 COLAs for their service after those dates. Also, the court left open the possibility that out of state retirees might be able to re-open the Stovall/Chess class action, an issue that the court indicated it did not have jurisdiction to decide.
Finally, the court outlined some general standards for how it intends to interpret the terms of the PERS contract going forward which are complex and will take time to analyze and understand.
Gregory A. Hartman and Aruna A. Masih Bennett, Hartman, Morris & Kaplan LLP 210 SW Morrison St., Suite 500 Portland, Oregon 97204-3149 www.bennetthartman.com
Here’s the link for the decision:
Updated: December 2014
The Oregon Supreme Court listened to oral arguments before the Court for October 14, 2014. The litigants had filed their written arguments framing the claims and issues they wanted the Court to consider, and presented oral arguments. There are 13 law firms representing the litigants and “friends of the court” in this court challenge.
“The Bennett Hartmann firm represents the PERS Coalition, including OPRI. They argued that SB 822 and SB 861, which reduced the COLA and eliminated the tax remedy for out-of-state retirees, violated the Oregon Constitution and the U.S. Constitution. Hartmann argued that both bills impair the statutory PERS contract, and that these two bills are unconstitutional takings of the private property of PERS retirees without just compensation. Finally, he argued that no legitimate public purpose justifies impairment of the PERS contract.
AARP and the International Association of Fire Fighters both filed amicus curiae (friend of the court) briefs in support of retirees. AARP argued that cutting the COLA severely hurts the economic health and personal well-being of PERS retirees, and in passing SB 822 and SB 861, the Oregon Legislature breached its promise to public employees in good faith.
The Association argues that SB 822 and SB 861 are a substantial breach of contract, contrary to the Oregon Constitution, merely to provide public employers with greater budget flexibility for other ordinary spending.
The State of Oregon, argues that neither the tax remedy nor the COLA is part of the PERS contract, therefore, SB 822 and SB 861 do not impact the PERS contract.
Furthermore, even if SB 822 and SB 861 are part of the contract, these bills did not impair the contract for the only duty under the contract is to annually determine the amount of the COLA, and elimination of the tax remedy for out-of-state retirees is consistent with the statutes.
Alternatively, even if SB 822 and SB 861 do impair the PERS contract, the impairment is not “substantial,” a test the State argues the Oregon Supreme Court should adopt and apply on a case-by-case determination. Impairment of the PERS contract is justified by the public good in freeing up money for local governments and schools.
The Oregon school districts argued there is no impairment or breach of the statutory PERS contract. And even if there is an impairment or breach, it is lawful for it is done as a reasonable and necessary means to address a significant and legitimate public purpose—funding public education.
Bennett Hartmann, in its rebuttal argument, stressed the legislative history, the legal precedents, and the reliance of most PERS members who joined the system after the COLA was enacted, all of which, the PERS Coalition attorneys say, support the COLA as part of the PERS contract.
Bennett Hartman estimates that the Court will issue a decision in about six months. This decision could come out in April 2015 – in the middle of the next legislative session.
The Legislative Assembly would have time to take up additional legislation to react to the Court decision and further “reform” PERS. Whether the Assembly would be inclined to do so may depend, in part, on the outcome of the November general election.