A Helena judge has blocked a legislative measure that cut retired teachers' annual inflationary pension increases, saying it violates the contracts clauses in the Montana and U.S. constitutions.
District Judge Mike Menahan ruled Tuesday that the Legislature's cost-saving measure that was part of a larger 2013 pension overhaul goes against constitutional provisions that prohibit the impairment of contract obligations.
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The judge ordered a permanent block to that section of the 2013 bill, saying the increases are contractually guaranteed to the workers and the bill unnecessarily affected that contract.
The law cut annual inflationary increases — known as the Guaranteed Annual Benefit Adjustment — in the Teachers' Retirement System from 1.5 percent to 0.5 percent. Legislators seeking to fix the pension shortfall also increased contributions from employers and employees, which will remain in effect.
The state teachers' union and six retired and current employees sued over the decreases, arguing the shortfall would be balanced without an unconstitutional cut to their benefits.
Menahan referenced in his ruling a report that estimated the hole would be fixed in 28 years without reducing the annual increases.
"The undisputed facts in this case demonstrate that increased contributions borne by workers, employers and the state ... brought the system back to actuarial soundness without cutting any benefits," he wrote.
The state argued the changes were necessary and that employee benefits constantly change. The judge dismissed the argument, citing a previous U.S. Supreme Court decision that said the constitutional contract clause would provide no protection at all if a state could reduce its financial obligations whenever it wanted for what it considered an important public purpose.
Montana attorney general spokesman John Barnes did not immediately return a call for comment Wednesday afternoon.
MEA-MFT union president Eric Feaver said in a statement the cut to the Guaranteed Annual Benefit Adjustment unnecessarily diminished an important benefit for teachers.
"The modest retirement provided by TRS — including the small annual increase in GABA — is partly what allows people to make a profession out of educating Montana's children," Feaver said.