Inside Report for May 11, 2012

Retirement changes face legal hurdles

Democrats predict all of the Jindal-backed bills to overhaul the state employee retirement system that pass will end up in court because most of the measures revoke an implied contract between the employees and their employers.

One of the overhaul proposals, House Bill 61, was free of constitutional issues, says state Rep. John Bel Edwards, until House Speaker Chuck Kleckley inserted one. The Lake Charles Republican twice ruled that the measure needed only a majority to pass, rather than a two-thirds majority that Democrats argue the state constitution requires.

Kleckley disagrees with Edwards, the leader of the House Democratic Caucus.

Either way, when the lawsuits are filed, Edwards said, one of them likely will focus on a 17-month-old constitutional provision that was added, ironically, by the sponsor of HB61.

Sponsored by state Rep. State Rep. J. Kevin Pearson, R-Slidell, HB61 would create a 401(k)-like pension plan for new state government employees. The bill was amended to allow existing members of the state’s current “defined benefit” retirement plan to opt into the plan, which is called “cash balance.”

Edwards, D-Amite, pointed to Article X, Section 29(F), of the Louisiana Constitution, which states in part: “No such benefit provisions having an actuarial cost shall be enacted unless approved by two-thirds of the elected members of each house of the legislature.”

The 10-page actuarial note attached to HB61 states: “There are too many variables affecting the final outcome to place a precise value on the cost differential.”

Edwards noted that when scheduled for debate on April 24, HB61 was designated as needing a two-thirds majority. Both sides did nose counts, Edwards said, and the number of supporters fell far short of the 70 needed under that scenario.

HB61 was rescheduled for debate on May 2 as needing only a majority, or 53 votes, to pass. The full House passed HB61 on May 3 with a 55-45 vote.

“They gave an artfully limited reading to the provision so they could pass the bill,” Edwards said of Gov. Bobby Jindal and his GOP majority in the House.

Republican state Rep. Jay Morris, a Monroe lawyer, argued that the constitutional provision did not apply because existing members could voluntarily join “cash balance.”

State Rep. Chris Broadwater, R-Hammond, but who practices law in Baton Rouge, said because the 2010 wording change struck the word “future” from the phrase “benefit provisions,” the Legislature two years ago meant that the two-thirds vote would apply to changes in existing retirement plans involving existing members of the retirement systems.

At the first hearing on the constitutional proposal, on April 29, 2010, Pearson said the provision would “take out some special interest” efforts to change benefits. The House and Governmental Affairs committee spent three minutes considering the legislation.

Prior to the November 2010 statewide election, the Public Affairs Research Council of Louisiana, better known as PAR, explained that proponents of the constitutional amendment hoped it would make it harder to incur additional costs associated with the public retirement systems.

A total of 728,533 Louisiana voters, or 65 percent of those participating in the Nov. 2, 2010 election, backed the provision.

“Cash balance was the only retirement bill without a constitutional problem and they created one,” Edwards said. “It will end up in court.”

Mark Ballard is editor of The Advocate’s Capitol news bureau. His email address is [e-mail].