TALLAHASSEE — The Florida Supreme Court heard oral arguments Friday in a case that could determine whether state legislators face another $2 billion budget hole next year, or state workers will see their salary cuts retained.
The lawsuit, Scott vs. Williams, was filed by the Florida Education Association after lawmakers passed and Gov. Rick Scott signed into law a bill in 2011 that imposed a 3 percent tax on 623,000 teachers, police, firefighters and other government worker salaries to offset the state's investment into the Florida Retirement System.
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.
But Leon County Circuit Court Judge Jackie Fulford ruled in March that the pension changes were unconstitutional because the changes violated the contractual rights of the FRS employees, took private property without full compensation and impaired their 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 paychecks. It is now up to the court to decide, but a decision could take months.
If the seven justices uphold the lower court ruling, state and local governments will have to reimburse active workers in the Florida Retirement System and cover the resulting hole in their budget. The state has already taken more than $900 wmillion from employees and are expected to take up to $2 billion by June 30, the end of the state's current fiscal year. State economists have predicted that revenues appear to be meeting expectations and, for the first time in years, legislators may not face another year of belt tightening.
If the court upholds the ruling, employees could see a 3 percent increase in their paychecks and cost-of-living adjustments could be resumed.
Justice Charles Canady, appointed to the court by former Gov. Charlie Crist, seemed to sympathize with the state.
"The whole state budget will be thrown out of balance,'' he said.
The teachers union lawyer, Ron Meyer, argued that Canady was "making assumptions that are not part of the case here." He said it was unlawful for the Legislature to impose the change on employees currently working for state and local governments without winning approval for the change in collective bargaining negotiations.
"We believe you can't change the game in the middle of the game,'' he said.
Arguing for the state was former Supreme Court Justice Raoul Cantero, now a lawyer from Miami. He cited a 1981 Florida Supreme Court case, Florida Sheriff's Association vs. Department of Administration, as the rationale for allowing it to change retirement benefits going forward and argued that if the lower court ruling is allowed to stand it "would handcuff the Legislature's response to changing financial circumstances."
He said it would be practically impossible for the Legislature to negotiate with 11 state bargaining units and dozens more at the local level.
Canady was not the only justice skeptical of the union's argument, however, during the 45-minute hearing. Justice Barbara Pariente also wondered how it could be lawful for the Legislature to increase retirement benefits without collective bargaining approval.
"Why would the Legislature bind itself forever, no matter what the budget crisis was, to a plan that could not decrease benefits but only increase it?" she asked.
Meyer responded that it was a policy decision lawmakers made in 1974 when they first agreed to make the FRS a non-contributory system. He said "they can't repeal a contractual right" retroactively but can only apply the contribution requirement to future employees. He also argued that the court should reject the decision from the 1981 court case.
"The contract says you have a right to a non-contributory system and you can't take that right away,'' he said.
The exchanges prompted Scott general counsel Jesse Panuccio to predict the high court will side with the state.
"We think pretty strongly the law is on our side and this change will be upheld," he said.
Mary Ellen Klas can be reached at meklas@MiamiHerald.com. Follow her on Twitter @MaryEllenKlas.