State appeals courts in Louisiana and New Mexico issued decisions this week important to public pension finance.
A Louisiana appeals court held that state law requires the City of New Orleans to contribute pension funding amounts calculated by the pension system actuary. According to the court, the City was not at liberty to put in less than the actuary's calculation of normal cost plus an amortization payment of the unfunded liability. This represents a fiscal challenge for financially-strapped New Orleans says NOLA.com:
Mayor Mitch Landrieu's administration has suffered another setback in its fight over payments to the pension fund for New Orleans firefighters. An appellate court ruled Wednesday (Dec. 18) that the city is indeed on the hook for $17.5 million that the administration failed to pay into the system in 2012.
A three-judge panel with the 4th Circuit Court of Appeal upheld Civil District Judge Robin Giarusso's ruling in March that the city must immediately pay up. That decision could fall hard on the cash-strapped city's finances as it struggles under the costs of two federal consent decrees meant to overhaul the Police Department and the city jail.
You can read the court's entire decision here.
The New Mexicio legislature, in an attempt to improve the funded status of its pension plan and control funding costs, passed a bill which would reduce future cost of living adjustments. The Supreme Court of New Mexico rejected public retirees' challenge to those reductions:
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. Once paid, of course, the COLA by statute becomes part of the retirement benefit and a property right subject to those constitutional protections.
Bartlett v. Cameron (N.M., 2013).
We can expect more cases in the future as actuarial projections of future pension costs create a challenge for the treasuries of state and local governments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
