Arizona Pension Change Struck Down

Arizona and Illinois have very similar constitutional language regarding pension funding. Both documents state that public pensions are a “contractual relationship” and that those benefits “shall not be diminished or impaired.”

On Friday, an Arizona Superior Court judge published her opinion that AZ’s constitutional mandate meant public employees couldn’t be forced to pay more into their pension system without any additional benefits. This is just a lower court ruling, but it likely won’t be appealed. Arizona’s Senate Majority Leader told local media on Friday that the state would rescind the law which increased employee pension payments and refund the money.

Forcing Illinois’ public employees to contribute more for their benefits is a key component of a pension reform bill sponsored by House Republican Leader Tom Cross. The idea behind the increased payments is to push employees into either an alternative, lower-cost pension plan or a 401(k) plan.

“By paying a higher proportionate share for their pension benefits than they had been required to pay when hired,” Maricopa County Superior Court Judge Eileen Willett ruled, “plaintiffs are forced to pay additional consideration for a benefit which has remained the same.” Willett also ruled that Arizona had “impaired its own contract,” with pension participants and that the law is an “interference with the PlaintiffsÕ contractual relationship [and] is unconstitutional pursuant to the contract clause of the Arizona and U.S. Constitution.”

Again, this is only one court ruling in a different state. So, it’s not the be-all and end-all by any means. But Judge Willett’s reasoning matches perfectly with what some union leaders have said about Leader Cross’ proposal for months. And the bill’s opponents now have a pretty good legal road map they can use.