MEMPHIS (MCT) – In August 1998, the Wilson County Commission passed a resolution that made it harder for some retired county employees to stay on government health insurance.
That did not sit well with two sheriff’s department employees, Robert Terry Davis and Donald Hamblen. Neither had retired, but they didn’t want to lose a benefit that they might use – and that the government had already offered.
“It’s kind of like your daddy giving you a $5 bill on a Saturday night,” Davis said in a recent interview. “Before you start out the door to get in the car, they turn around and want two of it back.”
Davis and Hamblen filed a lawsuit in the local chancery court in Lebanon, and the case went to the Tennessee Supreme Court. In 2002, the state’s highest court ruled against them, concluding that governments can cut these benefits if they choose.
Now the administration of Memphis Mayor A.C. Wharton, a Lebanon native, is looking to cut most health-insurance subsidies for city retirees. The administration points to the precedent in the Davis case as proof they can legally do this.
If the city council approves the cut, many retirees could find other health insurance, but many would have to pay far higher prices – in some cases hundreds of dollars more each month. The Association of Retired City Employees threatened a lawsuit in response and the organization’s attorney, Clyde W. Keenan, wrote a letter arguing that the Davis case precedent doesn’t apply to the situation in Memphis.
The interpretation of the Davis lawsuit matters because a legal action could complicate Wharton’s plan to stabilize city finances.
Wharton’s administration has said the subsidy cut would save $23 million in the 2014-15 fiscal year that starts July 1, plus wipe out most of a $1.3 billion unfunded liability for retiree health care. The savings would help the city add money to its pension plan – the city has long contributed less money to the pension fund than experts recommended, and a new state law requires the city to fully meet its yearly pension funding obligations by 2020.
A lawsuit might force the administration and city council to find other ways to balance the budget and fund the pension: for instance, through cuts in other areas or raising taxes.
In his opinion for the Davis case, then-Tennessee Supreme Court Justice E. Riley Anderson quoted an earlier court ruling that said: “The law is clear that there is no legal requirement on the part of a governmental entity to provide a welfare benefit plan to its employees and if it chooses to do so, the plan may be modified or terminated at any time.”
Keenan, the attorney for the Memphis retirees, addressed the Davis case in a June 2 letter to City Council chairman Jim Strickland. “Unlike Wilson County, Memphis is governed by a City Charter that has specifically addressed this issue,” Keenan wrote. He pointed to language in a 1966 amendment to the charter: “The council shall have no power to reduce or in any way diminish the pension benefits and other fringe benefits provided for all city employees as of the date the proposed new form of government becomes effective.”
Strickland said he’s asked the city’s attorneys to prepare a written response to the letter. He said the mayor’s administration has said several times that cutting retiree health-care subsidies differs legally from cutting pensions. “We’ve never seen a detailed analysis of that.” He said he expects the written response in a few days.
Governments across the country have moved to cut health insurance for retirees, and retirees have often reacted with lawsuits.
Some courts ruled that health-care benefits don’t have the same legal protections that pensions do. Last year in Lexington, Ky., for instance, a federal judge dismissed a lawsuit by a police officer and two retired officers who alleged the city violated their rights by not contributing the entire cost of retiree health-insurance premiums, the Lexington Herald-Leader reported.
However, California courts have reached various conclusions on the question in four different recent rulings, Bloomberg News wrote earlier this year. And a panel for the federal 6th Circuit Court of Appeals moved in January to temporarily halt cuts in health care for government retirees in Flint, Mich., pending a final ruling. Tennessee is part of the 6th Circuit.
After the Tennessee Supreme Court ruled against Davis and Hamblen in the 2002 opinion, both men continued to work in the Wilson County Sheriff’s department. Today, Hamblen is assistant chief. Davis has advanced to the rank of major, overseeing the patrol division, dispatchers and state warrants. He turns 65 this summer and plans to retire soon.
And in addition to health coverage under the federal Medicare program, he’ll have his county health insurance after all.
“So the Supreme Court said that if they giveth, they can taketh away, which makes sense. Funny thing about it is, though, that 10 years later they come back and give it all back to us,” he said, explaining that a different group of county commissioners made the change. “So we got the same benefit as we had before, only I’m several thousand dollars lighter in the pocket for having to pay for court costs and attorneys,” Davis said.
The Commercial Appeal contacted Wilson County officials about the policy change but was unable to reach a knowledgeable person by publication time.
Upon learning that retirees are talking about his lawsuit in Memphis, Davis said, “I wish ‘em luck.”
The city council is scheduled to vote on the retiree health-care cut June 17, though a delay is possible.