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Federal court upholds mayor's pension overhaul

A federal appeals court on Wednesday upheld Mayor Stephanie Rawlings-Blake's overhaul of Baltimore's police and fire pension system, but left open avenues for the unions to keep fighting.

"I'm certainly pleased with the court's ruling," Rawlings-Blake said of the decision. City officials say it cut about $400 million in pension costs by reducing benefits, raising the retirement age and requiring higher contributions from workers.

"It was not something any of us wanted to do," the mayor said. "We had to take some very dramatic action because of the fiscal conditions of the city."

The 4th U.S. Circuit Court of Appeals in Richmond, Va., overturned a lower court's ruling in 2012 that a key provision of the 2010 law limiting cost-of-living increases for younger retirees was unconstitutional and not reasonable. The appeals court concluded that the rights of the police officers and firefighters "were not impaired" because they could have contested the law in state court for "breach of contract."

The city's victory Wednesday likely was not the final word about the changes, which took effect in 2010.

Judge Barbara Milano Keenan of the 4th Circuit wrote that the unions could try again to challenge the law using a different argument, specifically that the city has taken "private property for public use, without just compensation."

Gene Ryan, vice president of the police officers union, said the "best" option would be to settle the suit, but the officers planned to continue the matter in court if necessary.

"We're going to push on," he said.

Rick Hoffman, president of the firefighters union, said the groups plan to continue to fight.

"Are we saying, 'Give up?' No," Hoffman said. "We have to get with our attorneys and decide which way to go, whether it's federal or state. I personally think this ruling strengthens our stance."

Hoffman lamented that no court to date has given a definitive, final ruling on the lawsuit, in which the public safety officers contend that Rawlings-Blake's pension overhaul was unconstitutional.

"Maybe I'm naive, but I kind of expected the 4th Circuit to say, 'You're a winner or a loser,' " Hoffman said. "Now we have to pay our attorneys more money to keep fighting, and the city has to keep paying its attorneys to keep fighting."

Rawlings-Blake has embarked on a long-term plan to reduce city spending, including cuts in health care expenses and a 10 percent reduction in the size of government. The unions contend that officials broke promises to public safety officers by overhauling their pensions.

Citing the city's improved fiscal health, Standard & Poor's recently upgraded the city's bond rating to AA.

The mayor introduced the pension overhaul in 2010, saying it would save the city at least $64 million a year and prevent an imminent fiscal crisis. The unions, in response, launched a campaign against Rawlings-Blake and her City Council supporters, picketing City Hall and posting billboards accusing elected leaders of turning their backs on public safety workers.

"It did get ugly," Rawlings-Blake said Wednesday. "It was a very unfortunate time for the city. But I knew back then that what I was doing was right, and I'm pleased the court hasn't undone our progress."

Under the mayor's plan, firefighters and police have been required to increase contributions to the pension fund — now 10 percent of their salaries. Many officers were told that they would no longer be able to retire after 20 years, but would have to stay on the force for 25 years to receive their pensions. Retired workers also lost what was called the "variable benefit," an annual increase tied to the stock market. Instead, the youngest retirees receive no annual increase through the variable benefit, and older retirees receive a 1 percent or 2 percent annual increase.

In 2012, U.S. District Judge Marvin J. Garbis took issue with that aspect of the law, ruling that the cost-of-living adjustments were unconstitutional in that they harmed younger retirees too severely. The appeals court overturned that decision Wednesday.

City Solicitor George Nilson said he believes the 4th Circuit's decision places the Rawlings-Blake administration in a stronger negotiating position.

"We won, but the ruling does not say there cannot be and will not be any more litigation," Nilson said. "It would be a long haul. They would have to start all over again. Litigation is expensive."

He said the unions previously asked for reimbursement of attorney fees and "significant annual expenses" from the city to settle the lawsuit.

"Those things aren't realistically on the table anymore," Nilson said.

Hoffman said the unions have always preferred to settle the suit rather than fight in court. He said he hoped Wednesday's decision would place new emphasis on settlement negotiations.

"I believe it's a signal to Stephanie Rawlings-Blake and myself to say, 'Let's sit down. Let's lock the door. And let's not come out until we're done with this,'" Hoffman said.

Rawlings-Blake has also targeted the city's other pension system. She's won passage of legislation requiring civilian municipal workers to contribute 5 percent of their salaries to their pension fund and privatized a portion of new workers' retirement plans. A plan to privatize part of the pensions of new public safety workers is pending in a City Council committee.

lbroadwater@baltsun.com

twitter.com/lukebroadwater

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