State should keep compensation promises to all workers

November 1, 2013 

Re: “Pension bonuses shouldn’t be graven in stone” (editorial, 10-23).

In 2007 the Legislature passed a law rescinding the right of public employees in the state’s Plan 3 retirement fund to receive a higher return based upon the fund’s investment performance. As adopted, this did not apply only to future employees, it applied to current ones as well; the bill’s own prime sponsor voted against it for this reason.

The Washington Supreme Court is considering whether this change was legal. The News Tribune argues it was. If it was illegal, restoring the benefit would be costly.

The change may prove legal. But is it just?

It is a familiar principle that changing your position in response to an offer — what is called detrimental reliance — defines a legal contract.

Thousands of workers changed from the defined benefit Plan 2 to Plan 3 based upon the promise of gain-sharing — 17,135 in the Teachers Retirement System alone. A state senator who chaired the Joint Committee on Pension Policy mailed a letter pitching Plan 3 to every Plan 2 member.

In selling Plan 3, neither this letter, nor the state’s own retirement handbook, intimated gain-sharing could go away. Yet, even if this implied a promise, the state now says its own retirement agency had no authority to make such a promise as the law itself made no guarantees.

Surely workers can be forgiven for not appreciating such niceties. The 2007 House bill report relates their reaction: “We have communicated the elements of this proposal to our members, and the reaction is disbelief. … When members were persuaded to enter Plan 3 there was no caveat, no qualification. Please defeat these measures and keep your promises. A promise has been made and should be kept.”

I was a House member in 2007. I recall a teacher coming up to me at the post office in tears. He had received awards for teaching, and his wife was a teacher, too. He said they knew a trade-off for teaching was they would never get rich. The teachers’ pay initiative passed in 2001 was frequently suspended. But they certainly had not expected being tricked into changing pension plans.

Do we want bait-and-switch government? Do we want to endorse public sector practices that would surely be illegal in a private context? We should be careful in answering those questions: The next ox to be gored may be our own.

It is not just state workers and teachers at risk.

Years ago the Department of Social and Health Services offered an extra Medicaid payment to those remodeling or building facilities to meet the state’s assisted living standard, which requires private apartment-like units with kitchen space, private bathrooms and bedrooms. The payment, however, was first suspended for budget reasons in 2002, even though assisted living facility owners couldn’t suspend their mortgage payments.

As is true now, the state argued its agency’s assurances created no right of contract for those running assisted living facilities. Again, while perhaps true legally, is it just?

The News Tribune is not incorrect about the exigencies the Legislature faces. Yet, at a minimum, a lesson here is that the state must be more careful in characterizing authority conferred by the Legislature. As private citizens, we are not free to lure, and entrap, people into commitments we will then break — telling our victims they should ignore what we said. Justice demands more.

Olympia attorney Brendan Williams was a 22nd District representative from 2005-11.

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