Municipal Blues

U.S. District Judge Marvin J. Garbis has struck down a key provision of Baltimore Mayor Stephanie Rawlings-Blake’s overhaul of the fire and police pension system. The decision could force the city to pay tens of millions of dollars more to retirees each year. Judge Garbis held that the city’s decision to change the method for determining annual increases for retirees — resulting in less money for many — was “unconstitutional” and not "”reasonable and necessary to serve an important public purpose.” The provision was one part of a 2010 ordinance that also delayed retirement for many police and fire employees and increased their contributions to the pension system. If the ruling stands, the total cost to the city is unclear. When Mayor Rawlings-Blake introduced the pension overhaul in 2010, she said it would head off imminent fiscal crisis, saving the city at least $64 million a year. Under the adopted—but now struck-down—plan, firefighters and police officers would have been required to increase their contributions to the pension fund. Those who had worked for the city for fewer than 15 years were told they would no longer be able to retire after 20 years, but would have to work for five additional years. Retired workers also would have lost what was called the “variable benefit,” an annual increase tied to the stock market. Instead, the youngest retirees received no annual increase, and older retirees received a 1-2% annual increase. In his decision, Judge Garbis said that the law’s cost-of-living adjustments were unconstitutional in that they harmed younger retirees too severely: [The plan “had the pernicious effect of eliminating and/or reducing annual increases from retirees under 65 at the time of enactment and, consequently, significantly reducing their pensions when they became 65…it was not reasonable…There was an important public purpose to be served by the restructuring of the Plan so as to restore it to actuarial soundness and sustainability….; [H]owever, the City did not have total freedom to disregard its contractual obligations altogether.”