In a unanimous decision, written by Chief Justice Balmer, the Oregon Supreme Court today declared the COLA modifications embodied in SB 822 and SB 861 of the 2013 Legislature UNCONSTITUTIONAL for worked performed prior to May 6, 2013 and October 9, 2013. This means that if you retired on May 1, 2013 or anytime earlier, the older 2%, COLA bank, and CPI provisions still apply to you as part of your PERS Contract. For work completed after either or both of those dates, the COLA will be a blend of the pre-2013 and post-2013 rates. Hopefully, the July 1, 2015 COLA will return to 2% for all eligible retirees, and the previous two COLAs for 2013 and 2014 will be adjusted accordingly in due time.
As for the income tax remedy, the Court ruled that the changes were permissible and are not contractual and were never intended to be contractual. The only remedy available to those out-of-state retirees who still feel aggrieved would be to reopen the class action lawsuit that led to the Chess settlement in 1997.
While I have only skimmed the lengthy and well-written ruling once, several things popped out. First, the court basically eviscerated the respondents' (State, et al) arguments about the non-contractual nature of the COLA, the poor-pitiful Pearl argument, the “it’s for the children” arguments and pretty much every argument the respondents made to justify their modification of the COLA retrospectively. The court also rejected the opportunity to re-visit their decision in the Strunk case (specifically, the Sartain case on the COLA in 2003), asserting that they got it exactly right in 2003.
All in all, I’d say that today was a good day for all PERS retirees and for most actives. The only people who will be fully affected by today’s ruling are those employees who started after May 6, 2013, but they aren’t generally the people who read this blog. So, while it will take some time to sort out the victory, today is a day that we can clearly celebrate. There was nothing that I saw that was ambiguous, filled with weasel words. The decision was clear and decisive.
One final observation. The Court spent a great deal of time explaining what constitutes a contractual element of PERS. It left very little wiggle room for future Legislatures to make any changes for retired members. It also did a great deal to make common sense of the words prospective and retrospective. It will give great pause to future Legislative assemblies on what might be permissible and what isn’t permissible changes to PERS as we knew it prior to May 6, 2013. Clearly, prospective changes are OK; any retroactive change to a contractual element is unconstitutional, and they basically said that in no uncertain terms.
I will follow this up as I have more time to read and digest the opinion. If you want to read it yourself, you can go to http://www.publications.ojd.state.or.us/docs/S061452A.pdf
This just in. Steve Rodeman, Executive Director of PERS, told Ted Sickinger from the Oregonian that the 2015 COLA will be 2%. PERS will then spend the next year sorting out all the complex calculations imposed by the Court’s decision for 2013 and 2014, and will try to have them remedied by 2016 COLA time. Good news.