Judge blasts city in police benefit case

Superior Court judge rules city was wrong to change retirees’ healthcare plans

WOONSOCKET – In a stinging rebuke to the city, a Superior Court judge has reversed a 2013 edict by the now-defunct Budget Commission requiring retired police officers to begin sharing in the cost of health care benefits for the first time.

Citing the authority of the Fiscal Stability Act of 2010, the city had argued that it was empowered to modify the retirees’ benefits without collective bargaining because of its dire financial situation.

In a 29-page ruling issued Thursday, however, Associate Superior Court Judge Jeffrey Lanphear resoundingly rejected the city’s position, declaring that the city had broken its contractual promises to members of the International Brotherhood of Police Officers union in violation of their civil rights.

“While it may be understandable, at this juncture, for policymakers to question whether a prior negotiated benefit was reasonable at the time, or more than deserved, that is not the court’s role here,’ Lanphear wrote. “Where the modification was done by the unilateral dictate of the government, the changes must pass constitutional muster. Here the Act does not provide the authority for the Budget Commission or the City of Woonsocket to avoid these binding contractual obligations.”

City Solicitor Michael Marcello said the city is still studying the decision and hasn’t decided yet how to proceed. An appeal to the state Supreme Court is an option to be discussed by Mayor Lisa Baldelli-Hunt and the City Council on Monday.

“I respect the judge’s decision but I disagree with it,” said Marcello. “It seems to suggest the only way to impair or change a contract is through direct negotiation or by declaring bankruptcy. That’s what the Fiscal Stability Act was designed to prevent. I believe he took an overly narrow view of the statutory scheme.”

The financial impact to the city is under review. Marcello said the city is carrying a $300,000 budget line as an accounts receivable in anticipation of collecting the disputed co-shares. That calculation may have to be revisited.

Led by retired Woonsocket police Sgt. Glen Hebert, more than 50 police retirees signed on as plaintiffs to the

suit in response to the commission’s edict on health care, which took effect July 1, 2013.

“We’re gratified,” said their lawyer, Edward C. Roy Jr. “Our view from the beginning was that there were limitations on the power of the budget commission. They do not have the power to alter a collective bargaining agreement.”

The decision says police joined the force under the presumption that the city would guarantee fully-paid health coverage for life, through retirement. As a result of the commission’s orders, retirees were instructed to begin paying co-shares of roughly $3,200 a year, or risk losing their coverage altogether.

In addition, retirees were switched to plans that called for higher deductibles and copays for medical procedures and prescription medications.

Roy said the plaintiffs were initially allowed to waive the largest portion of the new costs – mandatory co-shares – after the suit was filed, but they began paying them effective October 2015 under the supervision of the court.

Lanphear’s conclusions about the limits of the budget commission’s power couldn’t be clearer.

“The City claims the (Fiscal Stability) Act is the change in the law which empowered the City to nullify the express terms of the City’s contractual obligations,” the judge said. “There is no such authority in the Act, express or implied.”

A portion of the decision recaps the city’s rationale for imposing the modifications on cost-cutting grounds. The city produced reams of evidence supporting the notion that it was it was on the brink of a financial meltdown.

At the time the plaintiffs filed suit, the city had been in financial distress for many years, the decision notes. From 2007 to 2013, state aid to the city had been cut by $13 million, a reduction of 22.3 percent. Moody’s Investor Service was in the process of pushing the city’s credit rating into junk bond territory amid growing budget deficits and evaporating cash reserves.

Lanphear allowed that the city was broke – just not broke enough to justify going after the retirees benefits without collective bargaining.

“The city demonstrated that it was in precarious financial condition at the time the Budget Commission modified the contract provisions – but the situation was not necessarily dire,” he wrote. “The city could not demonstrate that it was on the verge of bankruptcy. A receiver had not been appointed.”

Lanphear said many of the city’s financial problems were of its own making. During “a downward financial spiral” that began years before the commission was seated, the city continued to negotiate collective bargaining agreements with police that “bound the city to significant future liabilities.”

By consenting to those collective bargaining agreements again and again, Lanphear said, “the city knowingly increased its future liabilities to more and more employees and their families with knowledge that its financial condition was in peril.”

The city’s preferred avenue of relief, the judge said, was to seek the court’s endorsement of “a cessation of some benefits in an ongoing contract... a deprivation of significant valuable rights while ignoring the written, negotiated and signed agreement.”

The FSA gives the state the power to intervene in a city’s financial affairs to varying degrees, among them, by seating a budget commission to handle financial decisions. But Lanphear said the commission was installed in Woonsocket mainly to serve the state’s interests, not the city’s.

If the city wanted the power to alter contracts in the absence of collective bargaining, it could have chosen other avenues, the judge concluded.

“Through this method, the state avoided having the city of Woonsocket go into a state receivership,” the judge said. “There is no showing on the record that the city of Woonsocket ever considered the option of a federal bankruptcy or receivership to empower the city to renegotiate its contracts. Instead, the Budget Commission operated as if it was the City of Woonsocket and decided which of its bills and obligations to pay and which to ignore.”

While the harm caused by the city’s actions to the plaintiffs was substantial, the judge said the city failed to make the case that their sacri- fices were helping improve the financial picture.

“Clearly, the city has failed to demonstrate that the contractual rights of the plaintiffs make the difference between bankruptcy and survival, were unanticipated, or will cause a loss which cannot be covered elsewhere,” he said. “The deprivations to the retirees were too broad and too deep to render them of a character appropriate to the public purpose.”

A number of examples of the impact of the modifications on individuals were cited in the judge’s order.

One policeman, Scott Strickland, retired on disability in 2010 – three years after suffering a herniated disc. He’s in chronic pain and requires medication. He retired with the understanding that he would receive fully paid health insurance for life, but in February 2014 he was informed his health coverage had changed. He was facing new out-of-pocket costs in excess of $400 a month, not including co-pays of roughly $35 per doctor visit.

Lanphear said “these employees honorably performed their employment obligations before retiring” – and there is no legal justification for stripping them of benefits promised in a contract that resulted from a lawful negotiation.

“One of the most basic principles of a just and civilized society is that a person will stand behind a promise that he or she has made,” the judge said. “Perhaps the earliest provision of our system of laws, therefore, is that such a commitment will be enforced by the courts.”