Falling into the Pension “Contract” Trap

One concern with the pension reform “settlement” that hasn’t gotten as much attention as it deserves is the effect it will have on the General Assembly’s ability to revisit the reform (the shelf life of which, I’m putting at about five more years).  Testimony, published on the RI Taxpayers site, from William J. Murphy, before the RI Senate Finance Committee, raises that concern in a bigger way than vague apprehensions would suggest:

Approval of the pension settlement currently under consideration by this committee would produce the disastrous unintended consequence of transforming state pension benefits from their currently advantageous legal status as legislative policies subject to revision by the General Assembly as it judges necessary to best serve the public interest into binding contractual obligations which cannot be changed lawfully by the legislature, even for this vital purpose,  through the exercise of its ordinary legislative powers.

Granting passage to the pension settlement legislation negotiated during the union pension lawsuit mediation process would produce this devastating result by introducing the element of “agreement of the parties” into the “circumstances of its adoption,” thereby satisfying the first and most important test of contract existence the courts apply when deciding whether government pension laws create contract rights.

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