Arizona Supreme Court Strikes Down Judge Pension Plan Changes

By Allie Weintraub

PHOENIX (CN) — The Arizona Supreme Court ruled that a state bill that changed judges’ retirement plans after they were appointed is unconstitutional, upholding the lower court’s ruling.

The bill in question, Senate Bill 1609, required judges to contribute more to their pensions than when they were hired while simultaneously reducing their future retirement benefits.

“We recognize that the financial soundness of public pension systems is a matter of great public importance,” Judge Randall Howe wrote in the state high court’s majority opinion, published last week. “We acknowledge that devising measures to guarantee the Plan’s financial stability is difficult and fraught with unpleasant policy choices. But whatever measures the Legislature enacts to address the problem still must comport with the Arizona Constitution.”

The Arizona Constitution states that “public retirement system benefits shall not be diminished or impaired.”

But SB 1609 hiked judges’ contributions from 7 to 13 percent of their gross salaries from 2011 to 2014. It also limited retirees’ yearly cost-of-living increases and reverted excess pension funds back to the state.

These changes violated terms set when the judges began their employment, Arizona Court of Appeals Judges Phillip Hall and Jon Thompson claimed in court.

They sued the state successfully in a class-action lawsuit on behalf of all judges hired before the now-overturned SB 1609 took effect in 2011.

“As a result of S.B. 1609, plaintiffs will pay substantially more in contributions to the plan, but receive no additional benefits,” the complaint stated.

The Public Safety Personnel Retirement System (PSPRS) estimates the ruling will cost $220 million in contribution refunds and retroactive pension increases, according to its website. The decision also applies to about 26,000 additional public safety officials.

In a press release, PSPRS administrator Jared Smout called the ruling “unfortunate,” but respected the Court’s decision. A PSPRS spokesperson also said measures passed earlier this year will overhaul the old pension plan and cut costs long-term.

The original pension plan became badly underfunded after investments in tech-industry securities soured. Because the judges’ contribution amount was set by statute, the state had to make up the entire difference until it passed SB 1609 in 2011.

Justice Clint Bolick and Judge Patricia Trebesch, sitting by designation, broke with the majority decision, arguing it would put an undue burden on taxpayers.

The majority opinion alluded to precedent set in Yeazell v. Copins, in which police officers sued over reductions in their own pensions and won the case at the appellate level.

But in his 16-page dissent, Bolick called Copins “a work of legal fiction to which the likes of John Grisham could only aspire.”

He argued that both in Copins and the current case, the plaintiffs “are either elected officials or judges who serve for fixed terms. No formal contract exists between the state and those employees. However … this Court fifty-one years ago implied such a contract for purposes of pension benefits, whose terms are largely set upon the employment date and whose benefits extend far beyond retirement until the employees’ beneficiaries pass on.”

Arizona Supreme Court Justices Scott Bales, John Pelander, Robert Brutinel and Ann Timmer recused themselves from the proceedings because they were in the group of judges impacted by the ruling.

Arizona Court of Appeals Judges Randall Howe and Kent Cattani and County Superior Court Judges Michael Butler and Patricia Trebesch replaced the justices temporarily for the case.

Neither attorneys for Hall and Thompson nor those for PSPRS immediately returned requests for comment.

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