Rhode Island Puts Pension Cuts On Trial

As reported in the New York Times, Rhode Island’s Superior Court is currently hearing a case on whether the recent sweeping pension overhaul enacted by the state may stand.  State and local governments across the country are following the case as an indicator of the strength of similar pension reforms in their areas.  Rhode Island has brought in nationally-renowned attorney, David Boies, to litigate the case.

Mr. Boies became involved, he said, because he was convinced that Rhode Island’s pension troubles were just the tip of a $5 trillion iceberg of unsecured retirement promises to the nation’s millions of public workers. “This is something that can cripple state and municipal governments at a time when the federal government is, more and more, cutting back on the services it provides,” he said.

Public employee unions, in Rhode Island and elsewhere, argue that people like Mr. Boies are exaggerating the size of America’s total public pension shortfall.

The fundamental question in the lawsuits is whether Rhode Island can renege on promises to public workers. The unions say it cannot, citing language in the state constitution forbidding the abrogation of contracts.

The state argues that its pension system was created by statute, not by contract, and statutes can lawfully be amended. In a previous suit, Judge Taft-Carter agreed with the unions that the pension system was an implied contract between the state and its workers.

Mr. Boies disagrees. “There’s no contract,” he said. “Even if there was a contract, the state, pursuing the public interest, has the right to modify contracts.”

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