TALLAHASSEE — In a dramatic defeat for the governor and the Florida Legislature, a Leon County circuit judge on Tuesday ruled that the decision last year to cut public employee salaries was an unconstitutional breach of the state's contract and ordered the money returned with interest.
The ruling leaves a potential $1 billion hole in the state budget for the 2011-12 budget year and another $1 billion hole for the 2012-13 budget year. It also has a $600 million impact for counties whose employees are in the Florida Retirement System.
"The 2011 Legislature, when faced with a budget shortfall, turned to the employees of the State of Florida and ignored the contractual rights given to them by the Legislature in 1974,'' wrote Circuit Judge Jackie Fulford, who also relied on a 1981 state Supreme Court ruling favoring public employees.
She said the Legislature's decision to cut public employee salaries 3 percent, without renegotiating their contracts, was an "unconstitutional taking of private property without full compensation" that violated the rights of public employees "to collectively bargain over conditions of employment."
The governor and Republican legislative leaders cut salaries 3 percent, eliminated cost of living adjustments, or COLAs, and shifted savings into the general revenue fund to offset the state's contribution to their retirement account. The change saved the state $1 billion during the 2011 legislative session and saved local governments $600 million.
Gov. Rick Scott blasted the ruling and said he would pursue a "swift appeal" of the decision so that it has no effect on the current budget. The state has already spent $500,000 defending against the lawsuit and has entered into a contract for another $300,000 for the appeal.
"As you would expect, I believe this decision is simply wrong,'' Scott said in a statement. He accused Fulford of ignoring "30 years of Supreme Court precedent" and called it "another example of a court substituting its own policy preferences for those of the Legislature."
The Florida Education Association and other state and local government unions challenged Scott and lawmakers, arguing that cuts to existing benefits for the 560,000 state and local employees in the Florida Retirement System needed to be negotiated in collective bargaining talks.
"This was a gamble that the governor and Legislature made last year,'' said Ron Meyer, attorney for the FEA. "They gambled taxpayers' money that they could balance the budget on the backs of the hardworking employees of this state. They lost that bet."
Lawyers for the House and Senate refused to comment on the ruling, but Senate President Mike Haridopolos, R-Merritt Island, was critical of Fulford and vowed to continue the legal battle.
"I think this is an example of judicial activism, and this is why we are immediately going to appeal this decision," Haridopolos said.
Meyer disagreed. He said "judicial activism is when a court ignores the law" and noted that the judge referred to a 1981 decision by the Florida Supreme Court, which ruled that while the Legislature could cut employee salaries, it could not breach the current contract it has with existing employees.
"This court cannot set aside its constitutional obligations because a budget crisis exists in the State of Florida,'' Fulford wrote. "To find otherwise would mean that a contract with our state government has no meaning."
Senate budget chairman JD Alexander said Tuesday that no matter how Fulford ruled on the lawsuit, it would have "no bearing at all" on this year's budget or last year's budget because the court can't order the Legislature to spend money.
"Only this Legislature can direct constitutional appropriations. Period. End of story," said Alexander, R-Lake Wales.
Countered the FEA's Meyer: "This is not a case of the state not having the ability to pay this money back. This is a case where the state has chosen not to pay these employees the money they are entitled to. We're not ordering a new appropriation."
The conflict is costing Florida taxpayers.
The state's Department of Management Services hired the Atlanta-based law firm of Alston and Bird to defend the state, paying eight lawyers $475 an hour. But the state exhausted the $500,000 retainer set aside for the initial defense, said Kris Purcell, spokesman for the Department of Management Services, so in December the state signed a second contract for $300,000.
FEA president Andy Ford called the ruling "historic" and said it proves "the Florida governor and the Florida Legislature are not above the law."
The ruling, however, could put some local governments in an awkward position, particularly those that gave employees bonuses or raises to offset the 3 percent contributions.
Hillsborough County agreed to pay most teachers bonuses of $750 this year to make up for changes to their retirement plan. The bonuses cost the school district more than $10 million.
Under Fulford's ruling, employees could stand to receive those bonuses on top of the 3 percent that had been taken from their paychecks.
Times/Herald staff writers Brittany Davis and Laura Isensee contributed to this report.