SANTA FE (AP) — New Mexico’s highest court is mulling whether the state can cut cost-of-living increases for retired educators to help shore up the pension system’s long-term finances.
The state Supreme Court is to hear from lawyers today in a case brought by four retirees, who say the state Constitution protects their pensions from reductions like those required under a law enacted earlier this year.
The retirees contend the law gives them a “vested property right” in their retirement benefits and they are legally entitled to the cost-of-living adjustments previously promised, which would have been 2 percent this year without the change in law.
The attorney general’s office and the Educational Retirement Board, in written arguments to the court, said the Constitution includes a provision that allows pensions to be modified to preserve the solvency of a retirement plan.
However, the retirees said in their lawsuit that provision only applies to retirement benefits before an employee works long enough to become vested in a pension system.
The Democratic-controlled Legislature and Republican Gov. Susana Martinez agreed on a package of pension changes this year to improve the solvency of the educational retirement program, which has a $6 billion gap between its assets and the benefits expected to be paid out in the future.
Besides trimming cost-of-living adjustments, the new law requires teachers and other educators to pay more into their retirement system if they earn more than $20,000 a year. It also changes benefits for newly hired educators, including imposing a minimum retirement age of 55.
Current retirees saw their pensions go up by either 1.6 percent or 1.8 percent after the cuts were implemented in July, instead of the 2 percent they would have otherwise received. The reductions are lower for long-term retirees who receive below average pension benefits. The pension plan will save about $2 million this year because of the lower inflation adjustments.
It’s possible the court could decide the case soon after the hearing, but the justices face no deadline.
A ruling by the court in favor of the retirees could sharply limit the state’s efforts to control rising costs of public employee pensions. The case potentially could affect far more than the nearly 100,000 educators and retirees covered by the educational pension system.
The Legislature approved a separate measure this year that lowered inflation adjustments for pension benefits under the Public Employees Retirement Association, which covers nearly 90,000 state and local government workers. Lawmakers also have been debating how to overhaul a financially struggling pension plan for judges.
It’s possible the state’s highest court could rule against the retirees on procedural grounds. The attorney general contends that the lawsuit should not have been filed directly with the Supreme Court and the pension dispute initially should have been handled by a lower court.