A key provision of Baltimore Mayor Stephanie Rawlings-Blake's overhaul of the fire and police pension system was struck down Thursday by a federal judge in a ruling that could force the city to pay tens of millions of dollars more to retirees each year.
U.S. District Judge Marvin J. Garbis held that the city's decision to change the method for determining annual increases for retirees — resulting in less money for many — was "unconstitutional" and not "reasonable and necessary to serve an important public purpose."
The provision was one part of a 2010 law that also delayed retirement for many police and fire employees and increased their contributions to the pension system. An attorney for the unions said the judge's ruling effectively struck down all of the changes the city had made to the retirement plans.
"It was an all-or-nothing proposition," said attorney Charles O. Monk. "The entire statute has been declared unconstitutional."
City Solicitor George Nilson said he had not scrutinized the ruling and therefore declined to discuss its implications, but he said it was "almost certain" the city would appeal to a higher court.
Fire and police union leaders called the ruling a major victory.
"Today is a big day for our police officers and our firefighters," said Fraternal Order of Police President Robert F. Cherry.
If the ruling stands, the total cost to the city is unclear. When Rawlings-Blake introduced the pension overhaul in 2010, she said it would head off imminent fiscal crisis, saving the city at least $64 million a year.
Rawlings-Blake spokesman Ryan O'Doherty said the administration was "carefully reviewing" the ruling to determine its fiscal impact and what its next legislative steps, if any, will be.
"The mayor came into office under very difficult circumstances and put forth a package that is fair and responsible, keeps the city solvent and protects the long-term sustainability of police and firefighter retirements," O'Doherty said. "If the system is broken, it won't be there when you need it."
Monk, the union attorney, said Garbis had arranged a meeting for both sides next month to discuss the next steps. The judge planned to issue orders explaining how to the proceed after that meeting, Monk said.
"If the decision became effective, it would be as if the statute had not been adopted," said Monk. "We would be back to 2010 and people would be entitled to retire after 20 years."
James Ulwick, an outside attorney hired to represent the city in the case, declined to comment, citing the pending litigation.
Rawlings-Blake unveiled the pension overhaul shortly after taking office in 2010 and frequently cites it as an example of a tough decision she was forced to make to keep the struggling city solvent. Her predecessors in the mayor's office, Rawlings-Blake has said, had "kicked the can" on the pension problem.
The fire and police union launched a public attack on the mayor and her council supporters, picketing City Hall and posting billboards accusing elected leaders of turning their backs on public safety workers. A bitter fight ensued as both the administration and the unions lobbied council members, but the council eventually agreed to the mayor's plan.
Under the plan, firefighters and police officers have been required to increase their contributions to the pension fund. Those who had worked for the city for fewer than 15 years were told they would no longer be able to retire after 20 years, but would have to work for five additional years.
Retired workers also lost what was called the "variable benefit," an annual increase tied to the stock market. Instead, the youngest retirees received no annual increase, and older retirees received a 1 percent or 2 percent annual increase.
Monk said that the variable benefit was the "heart and soul" of the new pension law and that its elimination invalidated the other pension changes.
Cherry said the unions offered over $80 million in savings and concessions to the city before the law was passed, but the Rawlings-Blake administration wasn't satisfied with their offer. "We were the ones who first approached the city to make these changes. We said we will take lesser payments for our retirees."
In his ruling, Garbis said that the law's cost-of-living adjustments were unconstitutional in that they harmed younger retirees too severely.
The plan "had the pernicious effect of eliminating and/or reducing annual increases from retirees under 65 at the time of enactment and, consequently, significantly reducing their pensions when they became 65," he wrote.
The law was "not reasonable," Garbis wrote.
"There was an important public purpose to be served by the restructuring of the Plan so as to restore it to actuarial soundness and sustainability," the judge wrote.
"However, the City did not have total freedom to disregard its contractual obligations altogether."