- Associated Press - Wednesday, February 12, 2014

WARWICK, R.I. (AP) - Plans to unveil a proposed settlement in the legal challenge to Rhode Island’s pension overhaul evaporated Wednesday and a date was set for trial, though officials engaged in closed-door talks over the landmark law’s fate insist negotiations will continue.

Public-sector unions and retirees have sued to block the 2011 overhaul, which raised retirement ages and suspended pension increases to save billions of dollars in costs to the state and its cities and towns. The lawsuit has been the subject of closed-door mediation since 2012.

Treasurer Gina Raimondo said Wednesday she worked late into the night Tuesday on the negotiations. She wouldn’t say why a press conference called to announce the settlement details was abruptly canceled or whether one party had reconsidered the proposed deal.

“It hasn’t necessarily fallen apart,” Raimondo told reporters after the state retirement board received an update on the case privately. She called the process “too important to rush” but that if no deal can be struck “we’ll proceed to trial.”

Superior Court Judge Sarah Taft-Carter met with both sides Wednesday and scheduled a trial on the lawsuit Sept. 15. That gives the parties more than seven months to reach a deal and either side a chance to avoid the risk of a costly and devastating loss in court.

In an indication the two sides may not be far apart on an agreement, the state retirement board scheduled another meeting for Friday to discuss and potentially vote to endorse a settlement proposal.

Rhode Island had one of the worst-funded pension systems in the nation before legislators enacted the 2011 law. Unions vowed to challenge the sweeping changes before they were signed into law, arguing they were unconstitutional and unfair.

The legal fight has been closely watched by unions, state officials and financial analysts around the country, as the Rhode Island law was seen as a model in several states grappling with their own pension problems.

The public still hasn’t learned the details of the settlement proposal. Raimondo, Gov. Lincoln Chafee and union leaders won’t say what is in the proposed settlement, citing a gag order in the case.

Any deal that does emerge would have to be approved by lawmakers. Chafee and Raimondo briefed top legislators on the deal Monday. A public announcement had been set for Wednesday afternoon - until the federal mediation service announced the cancellation just after 5 a.m. Wednesday.

House Speaker Gordon Fox called the closed-door process “strange and unusual” but said he would respect the call for secrecy - even though he and other lawmakers briefed on the settlement aren’t subject to the gag order. Fox, an attorney, said settlements in complicated cases often take a long time to work out.

“I could speculate all day,” Fox said of reasons for the cancellation. “It could be they didn’t have the report drafted on time. Who knows?”

House Majority Leader Nicholas Mattiello, D-Cranston, said the apparent hiccup in negotiations is “evidence that it’s going to be difficult to bring all of these parties together.”

Michael Yelnosky, a professor at Roger Williams University School of Law who specializes in labor, employment and civil procedure, said both sides have strong motivation to settle the lawsuit.

For the state, “if they lose this case, it’s a huge mess. It’s a massive monetary mess. It’s a massive political mess. It’s just a big mess,” he said. “And if you’re the union, it’s a really big loss because the pension benefits of the members have just been cut considerably.”

Yelnosky said that in complicated cases, it’s not unusual for two sides to get close to an agreement, then decide they need more time.

Both Fox and state Director of Administration Richard Licht, one of Chafee’s top advisers, disputed that opposition from key lawmakers may have sunk a settlement deal. Licht said that in briefings, lawmakers “expressed no opinion on this one way or the other.”

Fox said any potential deal to end the lawsuit would be carefully reviewed by lawmakers and said it’s possible that even if a settlement emerges soon it might not be voted on this year.

A spokeswoman for Chafee declined to comment on Wednesday’s developments. Chafee, a Democrat, is not seeking re-election. He was in Austin speaking at the University of Texas Tuesday and returned to Rhode Island on Wednesday.

Republican lawmakers said the process was confusing - to the public and to lawmakers.

“The entire mediation process is bizarre,” said House Minority Leader Brian Newberry, R-North Smithfield. “I think the court should rule on the issue.”


Associated Press writer Michelle R. Smith contributed to this report from Providence, R.I.

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