SALEM, Ore. — Attorneys representing public employees told the Oregon Supreme Court on Tuesday that a contract is a contract, and the justices should reject the Legislature’s attempt to reduce annual cost-of-living increases for retired workers.
But lawyers arguing on behalf of state and local governments told the justices during oral arguments there’s no evidence that lawmakers four decades ago intended cost-of-living adjustments for retirees to be a contractual obligation. Keith Kutler, a state Department of Justice lawyer, described the cost-of-living adjustment as a gift or add-on for workers who were already retired in 1971. Because they were already retired, they could not have accepted contract terms, he said.
State and local governments sought the pension cuts last year to avoid steep increases in their contributions to the Public Employees Retirement System. The action reduced employer contributions to the pension by roughly $800 million during the current two-year budget cycle. It’s unknown when the court will rule, but a decision is expected in time for the 2015 Legislature to deal with any fallout.
If the court upholds the changes, retired workers will see their pensions grow at a slower pace. Since the early 1970s, retirees have received an annual cost-of-living increase of 2 percent. Gov. John Kitzhaber and the Legislature reduced the annual adjustment (widely known as a COLA) to 1.25 percent on benefit amounts up to $60,000 and 0.15 on benefits exceeding $60,000.