SANTA FE – The New Mexico Supreme Court on Thursday backed the Legislature’s ability to trim certain public retirement benefits, rejecting a claim by four retired educators that the benefits represent promised property rights.
Justice Richard Bosson acknowledged the case could affect thousands of public-sector New Mexico retirees, writing the retired educators’ petition “casts a long shadow.”
The decision was lauded by the sponsor of legislation passed this year and signed into law by Gov. Susana Martinez to keep the Educational Retirement Board afloat.
“If we’re going to have a retirement system at all, the Legislature has to be the one to pass laws to run it,” said Senate Minority Leader Stuart Ingle, a Portales Republican.
The legislation to shore up the teacher retirement system, which has more than 61,000 active members and covers roughly 40,000 retirees, will trim annual cost-of-living adjustments for current workers and retirees until the pension fund’s solvency figures improve. It also requires stricter retirement eligibility for future hires.
The unanimous Supreme Court decision written by Bosson concluded that the COLA received by retired educators as an add-on to their earned retirement, starting at age 65, is not a core benefit.
“We hold, therefore, that in the absence of any contrary indication from our Legislature, any future cost-of-living adjustment to a retirement benefit is merely a year-to-year expectation that, until paid, does not create a property right under the Constitution,” Bosson wrote.
The state’s teacher retirement system has been grappling with worsening solvency problems caused by market-driven investment losses and a growing number of retirees, among other factors.
ERB Executive Director Jan Goodwin said a decision in favor of the retired educators would have delayed the pension fund’s recovery to solvency.
“They clearly said the Legislature has the power to make changes in the COLA, and that was exactly what we were looking for,” Goodwin said of the Supreme Court.
She also said the ruling clearly establishes the Legislature’s authority to adjust certain retirement benefits. That authority, or lack thereof, had previously been the subject of heated debate between legal experts.
The four retired educators challenging the benefit cuts included Joanna Bartlett, a former University of New Mexico professor, and Lenore Pardee, a former teacher at Del Norte High School in Albuquerque who receives an annual pension of $28,000.
They had asked the Supreme Court to restore the full benefits they would have received had the legislative pension cut not been implemented on July 1.
The attorney for the four retirees did not immediately return telephone calls seeking comment Thursday, but one of the plaintiffs in the case predicted “thousands” of retired teachers would be disappointed with the decision.
A spokesman for Martinez praised Thursday’s court ruling.
“The governor is pleased with the ruling, in that it upholds the bipartisan effort to reform and preserve the state’s educator pension system,” Martinez spokesman Enrique Knell said.
With this year’s legislation, New Mexico became one of several states to trim public workers’ retirement benefits in an attempt to buoy cash-strapped pension funds. Nationally, a number of other states have faced court challenges filed in response to pension benefit cuts, with mixed outcomes.
In New Mexico, solvency fixes approved this year for both the ERB and the state’s other public retirement system – the Public Employees Retirement Association – included such trims.
If the Supreme Court had not struck down the challenge to the ERB solvency bill, a similar challenge would likely have been brought against the PERA, attorneys had said.