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Wednesday, June 20, 2001 - Page updated at 12:00 AM

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Retirees sue: Pension-fund surplus ours

Seattle Times Olympia bureau

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OLYMPIA - Retired police officers and firefighters went to court yesterday to try to stop lawmakers from spending any of a $1 billion surplus in their pension fund.

The lawsuit is a pre-emptive strike because the Legislature has not yet approved taking the surplus from the Law Enforcement Officers' and Fire Fighters' Retirement System. But if it happens in the final days of the Legislature's special session - as the budget plan now assumes - and if Gov. Gary Locke signs the bill into law, the retirees would have a pending request before a judge to stop the move.

The suit says that the surplus can be used only to either increase benefits of retired police and firefighters or to give them cash buyouts. It claims that the pension fund is being targeted by legislators as a source of funding because police and firefighters are not as politically powerful in Olympia as teachers or other public employees with over-funded pension accounts.

But Senate Ways and Means Chairwoman Lisa Brown, D-Spokane, said this fund is different because taxpayers have financed most of it.

A little more than three-quarters of the fund has come from the state, with employees and local government employers splitting the remainder. Growth in the stock market in recent years helped push the value of the surplus up to an estimated $1 billion.

Lawmakers want to spend $125 million of the surplus to help pay for state operations in the 2001-2003 budget. A bill allowing use of the pension money has passed the Senate and is waiting for a vote in the House.

Depending on the actual value of the fund, at least $96 million of the surplus would go to local governments to defray medical costs of retirees covered by the fund and up to the same amount would be given to the retirees. Each enrollee would get a lump-sum payment of about $10,000 in addition to regular pension benefits they already receive. The remaining money, an estimated $608 million, would be deposited in a special reserve account.

Senate Democrats who crafted the plan say the surplus money is taxpayers' and is needed to balance the budget this year. Lawmakers are looking for extra money this year because they have to balance the budget in the face of rising health-care costs, voter-approved initiatives requiring teacher pay raises and money for schools.

"Maybe it will give them some thought that they should not do this," Seattle attorney Steve Berman said of the suit he filed in Thurston County Superior Court.

Berman said his clients are open to negotiating with lawmakers to find a compromise.

But the prominent litigator said, "I don't think they hired me for my negotiating skills. Not that I haven't done well there, but I think they felt they needed a serious trial lawyer."

Berman represented Washington state in the nationwide litigation against the tobacco companies a few years ago.

The suit involving the pension fund was filed on behalf of Alfred Fridell, a retired, 27-year veteran of the Seattle Police Department, and Clarence Willians, a retired 30-year veteran of the Seattle Fire Department. It asks a judge to create a class-action case, which would mean every retired police officer and firefighter would be represented.

Berman was hired months ago by a coalition of groups, including the Washington State Council of Firefighters and the Washington Council of Police and Sheriffs.

The Retired Firefighters of Washington, though, left the coalition after meeting with Berman and has hired its own attorney, former state Sen. and retired Supreme Court Justice Phil Talmadge.

Talmadge said yesterday he thinks Berman's move is premature. "I would prefer at least to try to sit down and talk to some of the actors on a significant issue like this before I rush off to court," he said.

Talmadge has filed a public-records request with the Legislature asking for any documents related to plans to spend the pension surplus.

While he's not yet ready to go to court, Talmadge said he hopes the threat of litigation will spur negotiations with lawmakers.

"I don't think it's lost on the Legislature that they may face serious legal consequences if they go forward with this legislation," he said.

Berman is angry that the association of retired firefighters hired Talmadge and left the coalition after having sat through all its confidential litigation-planning meetings.

The Democrat-led Senate first proposed tapping the surplus pension funds to help cover a gaping budget shortfall in March.

The Legislature is close to completing a new $22.8 billion budget. Under that plan, the state would spend an estimated $600 million more than it will take in over the next two years.

The $125 million of the surplus that lawmakers want to spend on state operations would largely go for ferries and for a deposit in the state's self-insurance account.

The House and Senate have both approved the spending plan, but the House has not yet passed a separate bill enabling the state to spend the pension surplus. Locke has said he would sign both the budget and the pension-fund bill.

It's unclear what impact the lawsuit will have in Olympia, where lawmakers are bogged down in one of the longest sessions in state history.

Republicans have objected to using the pension money, a one-time source of money, on ongoing expenses. And House Appropriations Co-Chairman Barry Sehlin, R-Oak Harbor, has said the state should hold off spending any of the money until legal questions have been resolved.

But most lawmakers, including some GOP leaders, say the pension surplus is taxpayer money that should be returned to the state.

"I think the state is on very, very solid ground - as long as we provide all of the benefits that were promised," said Sen. Dino Rossi of Issaquah, the ranking Republican on the Senate Ways and Means Committee.

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