In a major victory for Gov. Rick Scott, the Florida Supreme Court narrowly ruled against state workers and allowed the state to retain the 3 percent levy on worker salaries to offset the state's investment into the Florida Retirement System.
The 4-3 decision allows lawmakers to avoid another $2 billion budget hole next year, while state employees will see their salary cuts remain indefinitely.
The lawsuit, Scott v. Williams, was filed by the Florida Education Association. Lawmakers and Gov. Rick Scott had approved the new law over pension fund contributions in 2011. It affected the salaries of 623,000 public employees, including teachers, state, county and some city workers.
"The court's ruling today supports our efforts to lower the cost of living for Florida families. This means even more businesses will locate and grow in our state, which creates even more opportunities for Floridians to live their version of the American dream," said Scott in a statement from his office.
In the decision written by Justice Jorge Labarga, the court cited a 1981 ruling involving the Florida Sheriffs Association, saying the unions and trial court were incorrect in concluding that the decision was not intended to allow changes in retirement contribution plans for both current and future employees.
"We recognized the authority of the Legislature to amend a retirement plan prospectively, so long as any benefits tied to service performed prior to the amendment date are not lost or impaired,'' the ruling said, noting that the court "took special care in Florida Sheriffs" not to bind future legislatures.
Justices R. Fred Lewis, Peggy Quince and James E.C. Perry disagreed with the ruling and Lewis and Perry wrote separate dissenting opinions. Justice Barbara Pariente wrote a concurring opinion.
Union officials disagreed with the ruling.
"Balancing the state budget on the backs of middle-class working families is the wrong approach for legislative leaders and the governor to take,'' said Andy Ford, president of the FEA. "We're disappointed that the state's highest court said this approach was legal."
Matt Puckett of the Florida Police Benevolent Association said that while members "obviously are disappointed" they hope to keep any future reforms to the pension system "to a minimum.''
"We're a nation of laws. We respect the decision of the court. It seems well reasoned. We'll deal with it,'' he said.
Said Broward Teachers Union President Sharon Glickman in a statement to media: "Today's Florida Supreme Court ruling against Florida's hardworking public employees is disheartening. The only reason the Legislature and Governor took this action in the first place was to balance the state's budget by taking money from Florida's middle class workers who can least afford to lose it. Florida's public employees were promised a non-contributory retirement and our state is turning its back on this promise with today's ruling.
"With today's ruling, we are resolved more than ever to fight this ruling by changing the face of the Florida Legislature in the upcoming 2014 election."
Senate President Don Gaetz commended the ruling and said the changes were necessary "to maintain a sound retirement system for our hard-working state and local government employees as well as the reality that Florida taxpayers can no longer bear the full cost of this benefit."
Lawmakers argued at the time that the change was needed to fill a $3.6 billion budget gap and bring Florida in line with 47 states that require their government workers to contribute to their pension plans. The savings was then plowed back into the budget, not into the retirement fund.
The Supreme Court overturned a decision by Leon County Circuit Court Judge Jackie Fulford, who ruled in 2012 that the pension changes were unconstitutional because they impaired the contractual rights of the FRS employees, took private property without full compensation and violated employee collective bargaining rights. She ordered the state to halt the practice and reimburse workers with interest.
Attorney General Pam Bondi and Republican legislative leaders immediately challenged the ruling and continued collecting money from employee payments.
If the seven justices had upheld the lower court ruling, state and local governments would have had to reimburse active workers in the Florida Retirement System and cover the resulting hole in their budgets.
The state has already collected more than $900 million from employees and are expected to take up to $2 billion by June 30, 2013, the end of the state's current fiscal year.
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