Freezes to cost-of-living adjustments imposed on some retired police officers and firefighters by the city of Cranston were upheld by Rhode Island's Supreme Court.
The opinion, written on June 3 by Chief Justice Paul Suttell in Providence, upholds a 2015 state Superior Court ruling that the city's financial crisis warranted freezing the COLA adjustments to their retirement benefits, despite contractual rights to those benefits.
In 2013, the Cranston City Council enacted a 10-year freeze on COLA adjustments for employees of the Cranston Police and Fire departments, which Cranston Mayor Allan Fung said was necessary to prevent the $70.6 million Cranston City Police and Fire Department Pension Plan from becoming insolvent. A lawsuit by police and fire retirees challenging the freeze led to a settlement agreement to freeze COLAs every other year for the first 10 years, and then cap them for another 20 years.
That settlement was challenged by 70 retirees who opted out of the settlement and formed the Cranston Police Retirees Action Committee to sue the city, the mayor and the city council, arguing that the freezes were a breach of contract and that the city had a history of underfunding the pension fund, among other claims.
After losing the initial round, the plaintiffs appealed, challenging several of the trial judge's pretrial decisions, some findings and conclusions after trial, and the post-trial award of costs in favor of the city. A key argument in their appeal was that the 2013 ordinances violated the contract clause of the U.S. and Rhode Island constitutions.
The state Superior Court affirmed the judgment in favor of the defendants on all counts and denied the plaintiff's motion for a stay.
Calling it an "extremely close" case, Mr. Suttell upheld the Superior Court decision "with a decided lack of enthusiasm and only after prolonged research and reflection and hesitation," he said in an order that noted the lower court's "impressively Herculean effort to summarize the complex factual background that the case involves."
Mr. Suttell said that relevant precedent compelled him to concur because of the city's unanticipated fiscal crisis and because the COLA impairment is temporally limited. "In my heart of hearts, I think that we, as a nation and as a state, have strayed far from what the Contracts Clauses were clearly meant to prohibit, i.e., any law impairing the obligation of contracts," he wrote.
Mr. Fung called the decision historic, making Cranston "the first government entity in Rhode Island to reform its troubled pension system while withstanding a full legal challenge."
The "narrowly tailored" reforms will save taxpayers more than $6 million annually and ensure the long-term solvency of the police and fire pension plan, Mr. Fung said in a statement. "As mayor, I have ensured that we fully funded our (annual required contribution) and 100% of our (other postemployment benefits) obligations so that we are doing right by our workers," he said.
