Four years after lawmakers attempted to rein in public pension costs that threatened eventually to devastate government budgets, the Colorado Supreme Court has reached what should have been an obvious judgment all along: Of course lawmakers can roll back cost-of-living adjustments as part of pension reform.
“By its very nature,” the court said, “a statutory cost of living adjustment is a periodic exercise of legislative discretion that takes account of changing economic conditions in the state and/or nation.”
Unfortunately, that judgment was not obvious to some pension recipients in the Colorado Public Employees’ Retirement Association, who sued over the COLA cuts. They made the argument, in the Supreme Court’s words, that “they have a contract with the state of Colorado entitling each of them, upon retirement, to have their base pension benefit annually adjusted by the specific COLA formula in existence at the time they were eligible to retire, for the rest of their lives without change.”
Had the court accepted that argument, it would have resulted in many retirees receiving a 3.5 percent annual boost in benefits for as long as they lived — no matter what the actual state of inflation. That COLA was extravagant when it was put into statute in 2000; in the economic environment of recent years, it had become fiscally indefensible.
The biggest hurdle for the plaintiffs may have been the inconvenient fact that the legislature has changed the retiree COLA numerous times over the years. Why would anyone suppose it could never happen again?
Still, the court’s decision was never a given. In fact, the justices had to reverse a state appeals court ruling that said plaintiffs did have a contractual right to the COLA — although one potentially subject to “reasonable and necessary” adjustments.
No one doubts lawmakers have a responsibility to retirees, but they also have a duty to taxpayers who help to foot the bills.
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