- Associated Press - Thursday, February 20, 2014

PHOENIX (AP) - The Arizona Supreme Court ruled Thursday that the Legislature can’t cut cost-of-living increases promised to judges and state elected officials.

The court unanimously upheld a Superior Court judge’s ruling in favor of retired judges who challenged the Legislature’s 2011 decision to cut benefits increases for retirees in the state plan for judges and other elected officials.

The Legislature cut the cost-of-living increases after the judges’ retirement system lost money in the Great Recession after gradually becoming underfunded in previous years.

Denying an appeal by state officials, the high court agreed the increases are part of a promised retirement benefit and are protected by the pension clause of the Arizona Constitution. That clause bars “diminishing or impairing” public retirement benefits.

Lawyers for the retired judges had argued that the clause protected both their retirement benefits and the increases to those benefits, while lawyers for the state argued that the protection only applied to benefits with increases calculated by current methods.

Arizona is not alone in grappling with the problem of underfunded public pensions. A proposed ballot initiative in California would allow cities to renegotiate public workers’ future pension and retirement benefits. Oregon’s Legislature passed a law similar to what Arizona passed in 2011 that cuts future cost-of-living adjustments.

As in other states, the Arizona dispute touches on contract law because a promised pension is a contract.

However, like the trial judge, the Supreme Court declined to base its ruling on constitutional protections for contracts and chose instead to base its ruling on the constitutional provision dealing specifically with public pensions.

The Arizona justices acknowledged that they have personal stakes in the outcome of the case because they will be eligible for benefit increases upon their retirements.

However, the ruling written by Justice Robert Brutinel said the justices handled the case because none of the parties asked the justices to recuse themselves and because no other judges were available to decide it.

Stepping aside would mean the issue wouldn’t be decided, “and we must decide the matter,” Brutinel wrote.

The retirement plan for judges and elected officials - called the Elected Officials Retirement Plan, or EORP - was closed to new members last year by the Legislature because it was so badly underfunded.

Three other state retirement plans are in better shape but are also underfunded.