Arizona: Savings in retirement contribution shift outweigh costs to workers - East Valley Tribune: Arizona

Arizona: Savings in retirement contribution shift outweigh costs to workers

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Posted: Tuesday, August 23, 2011 3:26 pm | Updated: 11:40 am, Fri Sep 30, 2011.

The state wants a judge to throw out an effort by employees to kill a law requiring them to pay more toward their retirement benefits.

Charles Grube acknowledged that lawmakers, in a bid to balance the budget, scrapped laws that have been in effect for more than 25 years and had both public agencies and their workers contributing an equal amount into the Arizona State Retirement System. As of July 1, the state’s share dropped to 47 percent, with employees paying the other 53 percent of what is needed.

But Grube said the fact that the 50-50 split was in effect when these workers were hired does not entitle them to the same treatment as long as they are employed.

And Grube suggested to Maricopa County Superior Court Judge Eileen Willett that the interests of the state were more significant than those of any of the more than 210,000 state, school and local government workers affected.

He said a typical employee earning $50,000 a year would see a difference of only $12.41 in each of the 26 paychecks.

“Thus, this lawsuit is over a few dollars, far less than 1 percent of an employee’s salary,” Grube wrote in his legal pleadings. “On the other hand, the cumulative savings to the state and the other ASRS employers is considerable.”

That argument drew a sharp response from Sheri Van Horsen, president of Local 3111 of the American Federation of State, County and Municipal Employees.

“That’s not the point,” she said of the dollar figures. “You can’t use budget problems to break a contract.”

Grube, however, countered that there is no contract — at least not in this case.

Hanging in the balance most immediately is the $41.3 million this budget year the state expects to save by reducing its pension costs. That includes not only the direct savings to state government by reducing its obligations for its own workers but also a requirement for schools and colleges to pass on to the state the amount they will save on their employees’ pension costs.

Van Horsen pointed out that the Arizona Constitution makes the state pension system a contract. And another constitutional provision bars lawmakers from interfering in any contract.

She contends that 50-50 split in contributions to the pension funds became part of the contract between the workers hired on that basis and the state.

“If the state wanted to make it 53-47 for any new hires after the effective date of the law, we wouldn’t even be having this conversation,” Van Horsen said. She said these workers would have no right to demand a different split.

Grube does not see it that way. He said the law does not affect any rights of workers that already have been vested, such as the amount of benefits to which they are entitled.

“Instead, it provides for a change to the terms of future employment,” he said. Grube said this is no different from the power of the state to change salaries or benefits.

Grube also is advancing the legal theory that if the workers want to stop the higher deductions, they cannot just sue the state retirement system. He said each of their employers — the organizations that actually take the money out of the checks — need to be brought into court.

“I don’t think that’s necessary,’’ Van Horsen said.

Aside from Van Horsen’s union, the other employee groups suing are the Arizona Education Association and the American Federation of Teachers.

While the legislation also affects counties and cities with employees in the state retirement system, the law does not require them to send their savings to the state. Instead, these governments can pocket the difference.

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