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Valparaiso Univ. Law School

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Tuesday, March 13, 2012

Contracts Clause Issue in Florida

As reported in the Miami Herald, the Florida legislature attempted to close a budget gap through Senate Bill 2100, which cut state and local workers’ salaries by three percent, eliminated cost of living adjustments, and shifted savings into the general revenue fund to offset the state’s contribution to the workers’ retirement account.  State worker and their unions challenged the law. 

Fla SupremeLast week, on cross-motions for summary judgment in Williams v. Scott, Circuit Court Judge Jackie Fulford ruled against the Florida legislature.  Judge Fulford found that the three percent salary cut is an unconstitutional taking of private property without full compensation.  Permitting the cut would condone a breach by the state of the workers’ contracts in violation of the workers’ collective bargaining rights.  To rule otherwise, Judge Fulford noted, “would mean that a contract with our state government has no meaning, and that the citizens of our state can place no trust in the work of our Legislature.” Judge Fulford ordered the money returned with interest.

Judge Fulford first distinguished this case from a 1981 Florida Supreme Court (pictured) case, Fl. Sheriffs Ass’n. v. Dept. of Admin., 408 So. 2d 1033 (Fl. 1981), in which the court found no impairment of contract when a special risk credit was reduced from 3% to 2%.   While that case implicated only individual elements of future accruals within the state retirement plan, this case involves a complete change of that system from a noncontributory to a contributory plan.  In this case, Judge Fulford found an impairment of contractual rights and found that the impairment is substantial.  State impairment of contractual rights is nonetheless permissible if the state can demonstrate a compelling interest.  But Judge Fulford found that the state was unable to make such a showing.   A significant budget shortfall is not enough.  

Judge Fulford also found that Senate Bill 2100 would effect an unconstitutional taking under the Florida state constitution.  Bill 2100 also violates collective bargaining rights protected under Florida’s constitution, according to Judge Fulford.

According to the Miami Herald, this ruling leaves a $1 billion hole in the state budget for the 2011-12 budget year, another $1 billion hole for the 2012-13 budget year, and also delivers a $600 million blow to the Florida Retirement System. Governor Rick Scott vowed to swiftly appeal the “simply wrong” decision so that it has no effect on the current budget.  Scott called Judge Fulford’s ruling  “another example of a court substituting its own policy preferences for those of the legislature.”   For what it's worth, Judge Fulford was appointed by Governor Scott’s Republican predecessor as Governor of Florida.

[JT & Christina Phillips]

 

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