Eileen Bransten,, et al., Respondents,v.State of New York, Appellant.BriefN.Y.October 11, 2017No. APL-2015-00125 Supreme Court, New York County, Index No. 156160/2012 State of New York Court of Appeals EILEEN BRANSTEN, Justice of the Supreme Court of the State of New York, et al., Plaintiffs-Respondents, -against- THE STATE OF NEW YORK, Defendant-Appellant. REPLY BRIEF FOR APPELLANT BARBARA D. UNDERWOOD Solicitor General STEVEN C. WU Deputy Solicitor General JUDITH N. VALE Assistant Solicitor General of Counsel ERIC T. SCHNEIDERMAN Attorney General of the State of New York Attorney for Appellant 120 Broadway New York, New York 10271 (212) 416-6274 (212) 416-8962 (facsimile) Dated: April 27, 2016 i TABLE OF CONTENTS Page TABLE OF AUTHORITIES ............................................................. ii PRELIMINARY STATEMENT ........................................................ 1 ARGUMENT THE CHANGES TO THE STATE’S PREMIUM CONTRIBUTIONS COMPORT WITH THE COMPENSATION CLAUSE .................................................. 3 A. The Changes to Premium Contributions Only Indirectly Affect Judicial Compensation. ...................... 5 1. Raising the price of optional health insurance only indirectly affected judicial salaries. ................................................................... 5 2. The State’s premium contributions are not part of judges’ constitutionally protected compensation. ....................................................... 14 3. The cases cited by plaintiffs are inapposite. ........ 23 4. Plaintiffs’ theory would undermine the flexibility that the State requires to properly manage its insurance plans. ................................. 29 B. The Changes in Premium Contributions Are Nondiscriminatory Because They Apply Equally to Nearly All State Employees. .................................... 32 CONCLUSION ............................................................. 44 ii TABLE OF AUTHORITIES Cases Page(s) DePascale v. State of N.J., 211 N.J. 40 (2012) .................................................... 25, 26, 27, 28 Matter of Gordon v. Monaghan, 309 N.Y. 336 (1955) ..................................................................... 6 Matter of Hammon v. City of Fulton, 220 N.Y. 337 (1917) ................................................................... 24 Matter of Lippman v. Bd. of Educ., 66 N.Y.2d 313 (1985) ................................................................. 11 Matter of Mahon v. Bd. of Educ. of the City of N.Y., 68 A.D. 154 (1st Dep’t 1902) ...................................................... 24 Matter of Maron v. Silver, 14 N.Y.3d 230 (2010) ......................................................... passim Matter of Pisko v. Mintz¸ 262 N.Y. 176 (1933) ................................................................... 24 McBryde v. United States, 299 F.3d 1357 (Fed. Cir. 2002) .............................................. 9, 28 People ex rel. Bockes v. Wemple, 115 N.Y. 302 (1889) ................................................................... 14 People ex rel. Follett v. Fitch, 145 N.Y. 261 (1895) ....................................................... 15, 19, 20 Robinson v. Sullivan, 905 F.2d 1199 (8th Cir. 1990) .................................................... 15 Roe v. Bd. of Trustees of Vill. of Bellport, 65 A.D.3d 1211 (2d Dep’t 2009) ................................................. 27 iii TABLE OF AUTHORITIES (cont’d) Cases Page(s) Suttlehan v. Town of New Windsor, 31 Misc. 3d 290 (Sup. Ct. Orange County 2011) ................. 11, 12 United States v. Hatter, 532 U.S. 557 (2001) ............................................................ passim Laws N.Y. Const. art. VI ............................................................................. 16, 24, 42 art. XIX ...................................................................................... 21 Civil Service Law §§ 200-204 ......................................................... 23 Education Law § 391 ........................................................................................... 25 § 392 ........................................................................................... 25 Retirement and Social Security Law § 21 ..................................... 25 Ch. 60, pt. E, 2015 N.Y. Laws (L.R.S.) .......................................... 22 Ch. 491, 2011 McKinney’s N.Y. Laws 1363 ................................... 40 N.J. Const. art. VI .......................................................................... 25 N.J. Stat. Ann. § 52:14-17.31a ....................................................... 27 Miscellaneous Authorities Governor’s Mem., reprinted in Bill Jacket for ch. 461 (1956) ............................................................................. 29 N.J. Dep’t of State, Amended Certification of Public Question (Sept. 6, 2012), available at http://nj.gov/state/elections/2012-results/2012- amended-certification-public-questions.pdf. ............................ 25 iv TABLE OF AUTHORITIES (cont’d) Miscellaneous Authorities Page(s) N.Y. State Comm’n on Legislative, Judicial and Executive Compensation, Final Report on Judicial Compensation (Dec. 24, 2015), available at http://www.nyscommissiononcompensation.org/pdf/ Compensation-report-Dec24.pdf .......................................... 22, 37 Office of General Services, OGS Parking Policy and Registration Requirement, available at https://parking.ogs.ny.gov/ogs-parking-policy-and- registration-requirement ........................................................... 10 PRELIMINARY STATEMENT The State’s opening brief demonstrated that the sole effect of the State’s modest reduction to its contributions toward employees’ insurance premiums was a small increase in the price of insurance for those employees who elect to purchase a state plan. Such price increases do not directly diminish judges’ constitutionally protected compensation—because they do not directly affect any payments that were statutorily required to be made to judges—but rather raise a collateral cost that judges, like other state employees, pay out of their salaries when they choose to obtain the optional benefit of health insurance from the State. Raising premium prices for the overwhelming majority of state employees, as the Legislature did here, thus has only an indirect effect on judicial compensation that fully comports with the Judicial Compensation Clause. Plaintiffs fail to distinguish the State’s reduction in premium-contribution rates from routine premium-price increases and many other changes to optional state benefit plans that have never been understood to violate the Compensation Clause. And 2 plaintiffs’ argument that premium contributions are themselves part of protected judicial compensation is contradicted by the practical reality of how health benefits work, the long history of the Compensation Clause, and the State’s consistent maintenance of flexibility over its health-benefit plans. Accordingly, this Court should reject plaintiffs’ arguments and reverse the decisions of the lower courts. This Court should also reject plaintiffs’ assertion that the State’s reduction in premium contributions for the overwhelming majority of state employees discriminates against judges. Judges face the same financial burden from the increase in premium prices as nearly all unionized employees, and they are treated identically in all material respects to thousands of nonunionized employees who, like judges, cannot collectively bargain for their employment terms. This nearly uniform application of reduced premium-contribution rates belies plaintiffs’ contention that the challenged law and implementing regulations single out judges for unequal treatment. 3 ARGUMENT THE CHANGES TO THE STATE’S PREMIUM CONTRIBUTIONS COMPORT WITH THE COMPENSATION CLAUSE The legal principles that control this case are straightforward. New York’s Judicial Compensation Clause, like its federal counterpart, prohibits only direct reductions of judicial compensation during judges’ terms of office, such as a law that cuts judges’ salaries in half. But the Compensation Clause does not forbid the Legislature from enacting laws that only indirectly affect judicial compensation—i.e., laws that simply impose a cost that judges must cover out of their salaries, such as a tax—so long as such legislation does not discriminate against judges. See United States v. Hatter, 532 U.S. 557, 571 (2001); Matter of Maron v. Silver, 14 N.Y.3d 230, 252-54 (2010). See Pls.-Resp’ts’ Br. (“Pls. Br.”) at 4, 36-38 (relying on Hatter). This bedrock distinction between direct and indirect effects on judicial compensation makes sense because, unlike direct diminishments, indirect and nondiscriminatory effects on judicial compensation do not raise the threat to judicial independence that the Compensation Clause is designed to prevent. See Hatter, 532 U.S. at 571. 4 As explained in the State’s opening brief (Br. for Appellant (“App. Br.”) at 28-52), the changes to the State’s premium contributions at issue in this appeal only indirectly affected judicial compensation by raising the prices of the State’s optional health insurance plans, thereby requiring judges to pay a little more out of their salaries if they choose to participate in the state program. Because this price increase applies to nearly all state employees who choose to participate, it does not discriminate against judges, and thus comports with the Compensation Clause. See id. at 53-60. Plaintiffs’ arguments to the contrary are meritless. 5 A. The Changes to Premium Contributions Only Indirectly Affect Judicial Compensation. 1. Raising the price of optional health insurance only indirectly affected judicial salaries. As the State’s opening brief explained (App. Br. at 28, 31- 33), the State’s premium contributions provide state employees with a substantial discount on the price of state-provided health insurance by covering a portion of their total premium costs and thus lowering the prices that they pay to join state plans. The 2011 legislation at issue here authorized a reduction in this state- provided discount—from ninety percent to eighty-eight or eighty- four percent of premium costs—and a concomitant increase in the prices charged for optional state health insurance. This price increase does not directly reduce judicial compensation because it does not diminish any statutory entitlement to payments that judges previously received. Rather, the reduction in premium contributions only indirectly affects judges’ compensation by increasing an optional, collateral cost that judges pay out of their salaries if they choose to participate in a state plan. 6 Plaintiffs object to the State’s description of its premium contributions as discounts on the price of health insurance (Pls. Br. at 2-3, 23-29), but they do not dispute that the contributions operate in precisely the manner that the State has described. Plaintiffs thus agree that the State makes its contribution only for employees who opt into purchasing a state plan, and that the contributions are never paid directly to such employees, but instead are deposited into a central fund that is used to pay the costs of insurance premiums or provider claims.1 Id. at 25. See App. Br. at 32. Plaintiffs also do not contest that the 2011 reductions in premium contributions had no effect whatsoever on those judges (and other state employees) who declined to purchase a state health insurance plan; and that the sole effect of the 1 Plaintiffs’ assertion (Pls. Br. at 25) that the State’s pension contributions are also held in a centralized fund misses the point. Pooled pension funds are eventually paid out directly to employees as, essentially, deferred salary payments, see Matter of Gordon v. Monaghan, 309 N.Y. 336, 342 (1955), but the State’s premium contributions are never paid to employees—instead, they are paid to insurance companies or health care providers to offset the prices that employees would otherwise pay for premiums or services. 7 reduction on judges (and other state employees) who opted into purchasing a state plan was to “increase the amount that [they] pay for health insurance.” Pls. Br. at 11. However described, the financial effect on judicial compensation from decreasing the State’s premium contributions was an indirect one: for judges who opted to buy state health insurance, the premium-contribution reductions did not directly reduce any take-home pay that these judges had previously received, but instead required these judges to devote a little more of their salaries to cover modestly higher premium costs.2 There is thus no basis for distinguishing a decrease in the State’s premium contributions from the premium-price increases that employees regularly face when the State raises the biweekly premium costs of state health insurance plans. See App. Br. at 33- 2 Plaintiffs’ argument (Pls. Br. at 25-26) that certain employees are eligible to receive an incentive payment if they decline to purchase a state health insurance plan is irrelevant. Plaintiffs do not receive (and do not seek to receive) this distinct incentive-payment benefit, but rather choose to purchase state plans at prices that are subsidized by the State’s premium contributions. 8 34. Plaintiffs concede that increases in premium prices themselves have no direct effect on judicial compensation, but they assert that such routine price increases are different from the premium- contribution reductions at issue here because price increases are the result of inflation or increasing healthcare costs rather than a deliberate cost-saving decision by the State. See Pls. Br. at 27-28. This purported distinction is immaterial because, as plaintiffs acknowledge (Pls. Br. at 28), both price increases and reductions in premium contributions have the identical financial result of increasing premium costs—an outcome that, however it occurred, only indirectly affects judicial compensation. In any event, plaintiffs’ assertion that premium-contribution reductions are the result of a deliberate state choice, while premium price increases are not, is simply incorrect. Contrary to plaintiffs’ unsupported characterization, the State does not blindly accept premium price increases imposed by third parties or by market forces, but rather makes purposeful decisions about the appropriate prices to charge for state-provided health insurance plans, taking into account a broad range of factors such as the medical-coverage costs incurred 9 by state plans in the prior year, changes to insurance laws that affect coverage requirements, and the costs of new drugs that have entered the market. Thus, the State is no less deliberate about approving changes to premium prices than it was during the collective-bargaining process and legislative and administrative actions that led to the 2011 reductions in premium contributions. Whether achieved through increased premiums or decreased premium contributions, changes in the price of optional health insurance have only an indirect effect on judicial compensation. See App. Br. at 33-37. Just like higher taxes, lower reimbursements for employee expenses, or increased prices to park in a state-owned parking lot, higher prices for state-provided health insurance “simply claim a portion of [a] judge’s compensation” to cover higher costs, without directly diminishing any take-home pay that judges previously received. McBryde v. United States, 299 F.3d 1357, 1368 (Fed. Cir. 2002); see Hatter, 532 U.S. at 571; Matter of Maron, 14 N.Y.3d at 252-54. Plaintiffs try to distinguish these holdings and examples as not involving health insurance premiums (Pls. Br. at 22, 27-28, 31-32), but the 10 type of cost at issue is immaterial.3 The core principle that disposes of plaintiffs’ claims is that the Legislature’s decision to increase a collateral cost that judges pay out of their salaries—be it taxes, unreimbursed expenses, the price of parking, or health insurance premiums—does not directly reduce judicial compensation in violation of the Compensation Clause. This Court has reached the same conclusion in a closely analogous case involving pensions—which, like judicial compensation, are constitutionally protected from diminishment. In Matter of Lippman v. Board of Education, this Court held that a school board’s reduction to retired employees’ health insurance 3 Plaintiffs attempt to distinguish a price increase for state- offered parking from a price increase for state-offered insurance on the ground that the parking offered by the State “is available to all.” See Pls. Br. at 31. That is simply not correct. Just as only state employees can choose to participate in the state insurance plan, only state employees (and certain local governmental employees) can purchase a permit for a state-employee parking lot. See Office of General Services, OGS Parking Policy and Registration Requirement. In any event, the relevant point is that increasing the price for the optional parking or insurance benefit only indirectly affects employees’ compensation by increasing the amount deducted from employees’ paychecks to pay for the benefit they have chosen. App. Br. at 36-37. 11 premium contributions only indirectly affected pension income because the reduction operated like “an increase in the price of eggs at the supermarket”: it raised the price of insurance that retirees had to pay out of their pensions if they wanted state insurance, without directly diminishing pension benefits themselves. 66 N.Y.2d 313, 317-319 (1985). Plaintiffs assert that Matter of Lippman is inapposite because it involved pension benefits, but the Court’s reasoning applies equally here: just as the reduction in premium contributions in Lippman made “no change in [a retiree’s] retirement benefit,” as that term is used in the Constitution, id. at 318-19 (emphasis in original), so the reduction here made no change in judges’ constitutional compensation.4 4 Likewise, in a trial-court decision that is directly on point, Supreme Court, Orange County held in Suttlehan v. Town of New Windsor that a town’s reduction of its contribution rates towards employees’ health insurance premiums did not unconstitutionally diminish judicial compensation. 31 Misc. 3d 290, 291, 293-94 (Sup. Ct. Orange County 2011). Plaintiffs misconstrue this holding in asserting (Pls. Br. at 3-4, 22) that it turned on the plaintiff judge’s retired status—in fact, the town had reduced its premium contribution several months before the judge ever retired. 31 Misc. (continued on next page) 12 Faced with these many precedents and examples demonstrating that increasing a cost does not directly diminish judicial compensation, plaintiffs argue that reducing the State’s premium contributions is somehow different because the State offers an “overall benefit” of health insurance. See Pls. Br. at 23- 25. But plaintiffs’ constitutional claim does not rest on any general diminishment in this “overall benefit.” In particular, plaintiffs have made no allegation (and produced no evidence) that the actual health insurance coverage offered by the State has been reduced at all. (The available evidence suggests precisely the opposite—the coverage offered by state-provided health insurance has only become more comprehensive over time. See App. Br. at 47-48.) Instead, plaintiffs’ constitutional claim here is narrowly focused on the fact that the State’s premium contributions have been reduced. As discussed, that financial change—the only one at 3d at 291. In any event, plaintiffs have consistently maintained in this litigation that a judge’s status as active or retired does not alter the Compensation Clause analysis. (See R. 223-225.) 13 issue in this case—has only an indirect effect on judicial compensation. In any event, the fact that the State offers both the underlying benefit (i.e., health insurance) as well as a price discount (in the form of partial price coverage) does not transform the indirect effect that any change to the price discount has on judicial compensation. Whether the State or some third party provides the underlying benefit, the fact remains that judges’ take-home pay is not directly diminished by any change in the price for that benefit. And this is as true for health insurance as it is for the many other benefits that the State offers its employees at subsidized prices, including long-term care insurance, additional life insurance, or parking in state-owned lots in Albany. See App. Br. at 36-37, 51. Accordingly, like any other increase to collateral costs, the reductions to the State’s premium contributions only indirectly affect judicial compensation and thus do not implicate the Compensation Clause, so long as they are nondiscriminatory. 14 2. The State’s premium contributions are not part of judges’ constitutionally protected compensation. Plaintiffs echo the fundamental mistake underlying the lower courts’ opinions in arguing that the 2011 legislation and regulations directly diminished judicial compensation by reducing a benefit that was part of a total “compensation package” that judges were constitutionally entitled to maintain. Pls. Br. at 3, 11- 12. This compensation-package argument is contradicted by the history of the Compensation Clause and the precedents of both this Court and the U.S. Supreme Court. As the State explained in its opening brief (App. Br. at 5-10, 39-42), the “compensation” protected by the Compensation Clause has never included every valuable benefit of judicial employment. Rather, the Compensation Clause’s history and over a century of judicial precedent establish that protected compensation consists of judicial salaries set by statute, as well as other fixed, unconditional payments to judges that are akin to salaries. See, e.g., People ex rel. Bockes v. Wemple, 115 N.Y. 302, 310 (1889); App. Br. Addendum (“Add.”) at 10-12 (1921 constitutional 15 convention records). By contrast, both the framers and the courts have regularly rejected arguments to expand the scope of constitutionally protected “compensation” to cover other valuable benefits that are not similar to salaries. Thus, this Court has held that a valuable state policy of guaranteeing reimbursements for ad hoc judicial expenses did not establish constitutionally protected judicial compensation, and could thus be repealed. See People ex rel. Follett v. Fitch, 145 N.Y. 261, 265-66 (1895); Add. at 10-12. And the U.S. Supreme Court has squarely held that Congress’s elimination of a Medicare tax exemption worth thousands of dollars every year to federal employees (including federal judges) did not directly diminish judicial compensation for purposes of the federal Compensation Clause, see Hatter, 532 U.S. at 562, 571-72, even though the dissenting justice characterized the exemption as part of a constitutionally protected “‘package’ of benefits” previously provided to federal judges, see id. at 583-84; (Scalia, J., dissenting in part); see also Robinson v. Sullivan, 905 F.2d 1199, 1202 (8th 16 Cir. 1990) (rejecting argument that social-security eligibility was part of “a package of benefits” protected as judicial compensation). This history and precedent dispose of plaintiffs’ arguments. Premium contributions may be valuable to judges, but they have never been part of judges’ actual take-home pay, and thus have never been part of judicial salaries or other payments similar to salaries. App. Br. at 38-39. And even if premium contributions could somehow be considered direct payments to judges (which they cannot), the contributions would at best operate like reimbursements for the fluctuating premium expenses that certain judges, but not all, might choose to incur. Such reimbursements are also not protected judicial compensation. Id. at 39-41. The framers’ and this Court’s understanding of the Compensation Clause as protecting only salaries or similarly fixed, unconditional payments “established by law,” N.Y. Const. art. VI, § 25(a), sets a bright-line floor of constitutionally protected judicial compensation that is straightforward to apply to subsequent legislative or administrative actions. By contrast, 17 plaintiffs’ attempt to fashion a constitutional entitlement out of the State’s contribution of a percentage of voluntarily incurred premium costs raises difficult questions about the nature and application of the relevant constitutional baseline. For one thing, plaintiffs’ concession that the Compensation Clause does not apply to changes in premiums themselves leads to the anomalous result that the same increase in premium costs would be impermissible if accomplished through a reduction in the State’s premium contributions, but permissible if accomplished by raising premiums directly—even though the effect on judges’ (and other employees’) bottom lines is the same either way. In addition, the ability of judges (like other employees) to opt in or out of the State’s health-insurance program—and, once within the program, to opt in or out of different plans with varying prices and benefits—makes it difficult to determine the relevant constitutional floor of protected “compensation” under plaintiffs’ proposed rule. For example, it is unclear under plaintiffs’ position whether a judge who has never participated in the state program, and who has thus never benefited from the State’s premium 18 contributions, would be insulated from the reductions at issue here if the judge were to sign up for state-provided health insurance at a later date. Similarly, if a judge has previously chosen a more expensive state health insurance option (such as a family rather than individual plan), and thus received a relatively larger premium contribution from the State in absolute-dollar terms, it is unclear under plaintiffs’ theory whether or why that judge could permissibly receive a lower absolute-dollar contribution if the judge were to shift to a less expensive option later. Plaintiffs’ conception of protected “compensation” here thus raises difficult questions of definition and administration that are avoided by adhering to the historical focus of the framers and this Court on judicial salaries (and similarly fixed, unconditional payments) as the core compensation protected by the Compensation Clause. Plaintiffs’ attempts to elide the Compensation Clause’s history and this Court’s precedent are unavailing. First, plaintiffs are wrong in asserting that premium contributions are in any way comparable to “fixed and payable” sums disbursed directly to 19 judges. Pls. Br. at 29-31. As plaintiffs concede, premium contributions are paid to insurance carriers and health care providers, not to judges. And the actual dollar amounts of the State’s premium contributions fluctuate depending on whether a judge chooses to purchase a state plan at all and, if so, the specific premium costs associated with that plan. App. Br. at 40-41. See Pls. Br. at 30 (stating that premiums can change when employees annually reselect plans). Moreover, plaintiffs simply misunderstand insurance in asserting (Pls. Br. at 30) that premium contributions are “fixed” because they are paid before an employee incurs medical expenses. The State’s contributions offset the variable expense of premiums that employees pay to purchase insurance. The relevant expense is thus premiums, not actual medical costs: “it is only when” premium expenses are incurred, People ex rel. Follett, 145 N.Y. at 264-66, that the State provides premium contributions.5 5 Plaintiffs also miss the mark in arguing (Pls. Br. at 30-31) that premium contributions are fixed and permanent payments because the contributions have discernible monetary values. (continued on next page) 20 Second, plaintiffs essentially ask this Court to ignore the precedential effect of Follett and other early decisions regarding the scope of the Compensation Clause, asserting (Pls. Br. at 15-16) that the Compensation Clause impliedly expanded in 1961, when a constitutional amendment reorganized the courts. But this amendment did not alter the relevant language of the Compensation Clause, instead carrying forward the same text and meaning as the preexisting provision. See App. Br. at 9-10. This Court’s past cases have thus interpreted the present meaning of the Compensation Clause in light of the same history that the State relies on here. See Matter of Maron, 14 N.Y.3d at 251-53. And there is no support for plaintiffs’ suggestion that the Clause’s scope suddenly changed when the State began offering optional health insurance plans or premium contributions, since neither legislative nor administrative action can alter the meaning of the Every reimbursement for expenses also has a monetary value that can be understood once the reimbursement is paid. But this value does not transform the reimbursement into constitutionally protected judicial compensation, as this Court has made clear. People ex rel. Follett, 145 N.Y. at 264-66. 21 Constitution. See N.Y. Const. art. XIX, §§ 1-3 (setting forth procedures for amending Constitution). Indeed, nothing indicates that the Legislature ever intended premium contributions to become a fixed and permanent part of judicial compensation. To the contrary, the Legislature has from the beginning insisted on maintaining extensive flexibility over the costs and benefits of state plans—flexibility that it has routinely exercised and applied to both judges and other state employees. See App. Br. at 15-20, 45-49. Third, plaintiffs assert (Pls. Br. at 14-15) that the State’s premium contributions are part of judicial compensation because the State essentially reduces the salaries it would otherwise pay employees when it provides health benefits. But this assertion is demonstrably untrue for judges, whose salaries are fixed by law through a process that is separate from the State’s consideration and alteration of the terms of its statewide employee health- benefit plans. In the past, judges’ salaries were traditionally set through legislative amendments to judicial salary schedules, which were not tied to health-benefit prices. See App. Br. at 10-11. 22 More recently, the Legislature has established a commission process for judicial compensation that expressly distinguishes between judge’s “compensation and non-salary benefits,” with only the commission’s judicial compensation recommendations (but not its recommendations regarding “non-salary benefits”) becoming law if not altered by the Legislature. See Ch. 60, pt. E, 2015 N.Y. Laws (L.R.S.), at 92-24. Indeed, since the filing of the State’s opening brief—and more than four years after the State implemented the changes to premium contributions at issue here—the Compensation Commission again considered judicial salary rates and recommended a judicial-salary increase that became law on April 1, 2016, without making any separate recommendations regarding judges’ nonsalary benefits or suggesting that its salary recommendations were affected by the amounts judges contribute to optional premium costs. See N.Y. State Comm’n on Legislative, Judicial and Executive Compensation, Final Report on Judicial Compensation 9, 12 (Dec. 24, 2015) (“2015 Commission Report”) (recommending that Supreme Court judges’ salaries be set at ninety-five percent of 23 federal district court judges’ salaries as of April 1, 2016, which raised New York judges’ salaries from $174,000 to a projected $193,000). 3. The cases cited by plaintiffs are inapposite. To support their argument that the State’s past level of premium contributions is judicially protected compensation, plaintiffs rely on inapposite cases that have no direct bearing on the specific issue here. First, plaintiffs cite cases that did not involve judicial compensation or the Compensation Clause at all. See Pls. Br. at 15-19. For example, plaintiffs rely on many cases involving New York’s collective-bargaining statute, the Taylor Law, see Civil Service Law §§ 200-204, in which courts have concluded that the “terms and conditions” of public employment subject to mandatory collective bargaining include not only salaries but also many employee benefits. But the meaning of the broader statutory phrase “terms and conditions” of employment has no bearing on the narrower and more specific constitutional 24 phrase “compensation of a judge . . . established by law,” N.Y. Const. art. VI, § 25(a).6 Second, plaintiffs’ attempt to analogize the instant litigation to cases involving employee pensions fails. Pls. Br. at 19-20. As explained, pension payments are essentially deferred salary payments that are eventually given directly to employees. By contrast, the State’s premium contributions are paid to insurance carriers and medical providers rather than employees. See supra at 6. Pension payments are thus more akin to statutorily fixed judicial salaries and other permanent payments to judges that have traditionally been considered protected judicial compensation. Moreover, the mandatory nature of state employees’ contributions to New York’s pension system, see 6 Plaintiffs likewise misplace their reliance (Pls. Br. at 16-19) on irrelevant cases interpreting other constitutional or statutory provisions that have nothing to do with the Compensation Clause. See, e.g., Matter of Mahon v. Bd. of Educ. of the City of N.Y., 68 A.D. 154 (1st Dep’t 1902) (constitutional prohibition against giving away state money or property); Matter of Pisko v. Mintz¸ 262 N.Y. 176 (1933) (worker’s compensation law); Matter of Hammon v. City of Fulton, 220 N.Y. 337 (1917) (statutorily defined death benefits for firemen). 25 Retirement and Social Security Law § 21; Education Law §§ 391- 392, further distinguishes those contributions from costs for optional state insurance. Finally, plaintiffs’ heavy reliance on a closely divided decision of the Supreme Court of New Jersey, DePascale v. State of New Jersey, 211 N.J. 40 (2012) (see Pls. Br. at 19-21), also fails for several reasons. As an initial matter, DePascale has been overturned by a state constitutional amendment that “clarifies” that New Jersey’s compensation clause does not prohibit that State from enacting laws that increase judges’ contributions toward the costs of their employee benefits, including pensions and health care coverage. N.J. Dep’t of State, Amended Certification of Public Question (Sept. 6, 2012), at Public Question No. 2; see N.J. Const. art. VI, § VI, ¶ 6. This Court should not rely on the reasoning of a closely divided, out-of-state decision that both the voters and legislature of New Jersey have now firmly repudiated. In any event, the reasoning of DePascale is easily distinguishable. The New Jersey Supreme Court relied heavily on 26 the fact that judges’ premium costs had been increased “without any corresponding salary increase,” thus resulting in a “net loss in [judges’] take-home pay.” 211 N.J. at 42-43, 58. No such argument can be made in New York: to the contrary, judges in New York have received significant pay increases since the 2011 changes to the State’s premium-contribution rates. See App. Br. at 11-12; supra at 22-23. In addition, as the State explained in its opening brief, the DePascale court based its decision on New Jersey’s having mandated that judges dedicate a larger portion of their salaries towards pension and health benefit plans. App. Br. at 44- 45. Plaintiffs assert that the health-benefit payments in DePascale were actually optional (Pls. Br. at 20-21), but the court plainly thought otherwise, stating expressly that the statute would subject judges to “a more than one-hundred percent increase in required health plan contributions,” 211 N.J. at 45-46 (emphasis added).7 The DePascale court’s reasoning is thus inapposite here, 7 The provisions of New Jersey law to which plaintiffs point (Pls. Br. at 20) provide only that state employers are permitted, but not required, to allow employees to waive coverage under the (continued on next page) 27 where judges remain free to choose whether to dedicate any portion of their salaries to pay the premium price associated with a particular plan. Even putting these distinctions aside, this Court should decline to follow DePascale for the reasons persuasively stated by the two justices in dissent. As those justices explained, the majority opinion was fundamentally flawed because it failed to follow the U.S. Supreme Court’s critical distinction between impermissible direct reductions to judicial salaries, and permissible indirect effects on judicial salaries.8 211 N.J. at 91-92 State’s insurance plan. See N.J. Stat. Ann. § 52:14-17.31a(b). This statute does not provide that state judges in particular are given that option, and the DePascale court’s reasoning explicitly assumes they are not. If, as plaintiffs contend, the facts are otherwise, that does not change the reasoning of the decision, though it may call into question the decision’s factual predicate. 8 Plaintiffs’ reliance (Br. at 23-24) on Roe v. Board of Trustees of the Village of Bellport, is likewise misplaced because Roe failed to apply—or attempt to distinguish—Hatter in concluding that a village violated the Separation of Powers Clause by requiring its elected officials, including judges, to pay the same costs as other village employees to purchase optional health insurance. 65 A.D.3d 1211, 1211-12 (2d Dep’t 2009); see Add. at 14, 16. Under a proper application of Hatter, such an increase to (continued on next page) 28 (Patterson, J., dissenting). Indeed, the majority opinion expressly found the statute in question to effect “an unconstitutional diminution” regardless of whether it was characterized as “a direct or indirect diminution in salary.” Id. at 44. The majority opinion also incorrectly characterized the Hatter analysis as applying only when a government enacts a new tax, id. at 60-64— a mischaracterization that this Court has already rejected.9 See Matter of Maron, 14 N.Y.3d at 254-55 (applying Hatter framework to effects of inflation); see also, e.g., McBryde, 299 F.3d at 1367-69 (same for expense reimbursement). DePascale thus does not provide any persuasive support for plaintiffs’ constitutional arguments here. justices’ premium costs had only an indirect, nondiscriminatory effect on judicial salaries that comported with the Constitution. 9 DePascale’s theory that changes in premium rates directly reduced judicial salaries simply because judges pay premium costs out of their paychecks, see 211 N.J. at 44, has already been rejected by this Court’s decision in Matter of Lippman. See supra at 10-11. 29 4. Plaintiffs’ theory would undermine the flexibility that the State requires to properly manage its insurance plans. The State’s opening brief explained that the inherently flexible nature of state insurance plans further demonstrates that premium contributions are not part of judges’ fixed constitutional compensation. As the State established, the Legislature has always maintained flexibility over the balance of costs and benefits in state plans to ensure that plans can be adjusted to reflect near-constant changes in health care costs, insurance regulations, and medical technologies. App. Br. at 45-53. Plaintiffs contend (Pls. Br. at 33-34) that the State’s plans are actually rigid rather than flexible because the State cannot “unilaterally” alter premium costs or other benefit terms for unionized employees absent negotiation. But the mere fact that the State must confer with unions regarding changes to the terms of state plans in no way alters the fundamental need to maintain flexibility over plan terms to obtain “the best service at the lowest cost” for all employees who want state insurance, Governor’s Mem., reprinted in Bill Jacket for ch. 461 (1956), at 4—flexibility 30 that the State has repeatedly exercised by reducing its premium contributions, raising premium prices, and altering health benefits. See App. Br. at 18-20, 46-49. Because the reductions to premium contributions are no different from such routine changes to insurance plans, accepting plaintiffs’ arguments here would undermine the flexibility that the State requires to manage its health insurance and other benefit plans. App. Br. at 50-52. Plaintiffs demand that the Court ignore the sweeping consequences of their Compensation Clause theory, claiming that the Court can decide later whether “more difficult to categorize changes” in benefits would be unconstitutional. Pls. Br. at 34-35. But plaintiffs do not, because they cannot, provide any meaningful standards for differentiating between reducing premium contributions and raising premium prices, or making any other alteration to the balance of costs and benefits in state insurance plans. Plaintiffs assert only that their view of the Compensation Clause’s scope would allow a “variety of” benefit changes because the Clause “protects only against diminution, not change.” Pls. Br. 31 at 34. But this assertion is entirely circular: because all benefit terms could be said to be part of judges’ “compensation package,” see id. at 3, any “change” to those terms that results in a “diminution” of the benefit’s value, id. at 34, would violate the Compensation Clause under plaintiffs’ view. The disruptive and potentially limitless results from accepting such a theory highlights why changes to benefit prices that only indirectly affect judicial salaries do not implicate the Compensation Clause. 32 B. The Changes in Premium Contributions Are Nondiscriminatory Because They Apply Equally to Nearly All State Employees. As the State’s opening brief explained, because the changes to the State’s premium contributions only indirectly affect judicial compensation, they comport with the Compensation Clause so long as they do not single out judges to bear a financial burden. App. Br. at 53-60. See Hatter, 532 U.S. at 561, 573-74. Plaintiffs do not dispute that the reductions in premium contributions apply to ninety-eight percent of the state workforce, representing at least 185,000 active state employees.10 (R. 293-294.) See Pls. Br. at 40 (conceding that “vast majority of State employees were impacted by the reduction in premium contributions”). This uncontroverted fact is the end of the matter. Put simply, judges 10 Plaintiffs’ assertion (Pls. Br. at 38-39) that the proper comparator is “State citizens” rather than state employees has already been rejected by the Supreme Court and this Court (see App. Br. at 58). See Hatter, 532 U.S. at 572; Matter of Maron, 14 N.Y.3d at 256. Plaintiffs do not and cannot explain why these precedents do not control here. Their argument based on “discrimination as compared to all State citizens” (Pls. Br. at 38) should be rejected. 33 could not have been singled out to shoulder a financial cost when nearly all state employees must bear exactly the same cost.11 Plaintiffs argue that the burdens faced by judges are not truly comparable to the burdens faced by other state employees because most of these other employees belong to unions that, during the collective-bargaining process, chose to accept the premium-contribution reductions in exchange for layoff protections. Pls. Br. at 39-43. Unlike unionized employees, plaintiffs argue, judges had no choice in the matter and received “nothing in return” for the reductions. Pls. Br. at 45. 11 The State has never argued, as plaintiffs mistakenly assert, that judges are “singled out,” Hatter, 532 U.S. at 577, for purposes of a discrimination claim under the Judicial Compensation Clause only if “not one other State employee was treated the same” as judges. See Pls. Br. at 42-43. What the State has argued—and what the case law clearly supports—is that a claim of discrimination against judges cannot be sustained if a substantial number of nonjudicial employees are treated the same way. See Hatter, 532 U.S. at 561; Matter of Maron, 14 N.Y.3d at 256. Here, plaintiffs can make no plausible argument that judges have been singled out for disadvantageous treatment when the State’s premium-contribution reduction applies to ninety-eight percent of state employees. 34 Plaintiffs are wrong to argue that these differences between judges and unionized employees support a discrimination claim under the Judicial Compensation Clause, as explained further below. But this Court need not address this issue because plaintiffs’ argument fails for a more straightforward reason: whatever the differences in treatment between judges and unionized employees, judges were treated the same as more than 12,000 other nonunionized employees who were designated “managerial” or “confidential” (“M/C”) employees. See App. Br. at 57-58. M/C employees are similar to judges in the respects that plaintiffs claim are relevant: specifically, they are prohibited from collective bargaining; received no layoff protections in exchange for the State’s reductions in premium contributions; and were subject to those reductions through the same statute and regulations that extended the reductions to judges. Id.; see also id. at 21-22. The identical treatment of judges and more than 12,000 nonjudicial M/C employees disposes of plaintiffs’ discrimination claim, regardless of how other state employees may have been 35 treated. This Court’s decision in Maron is squarely on point. In that case, judicial plaintiffs asserted that they had been unconstitutionally discriminated against because they had not received certain cost-of-living salary increases that the Legislature had extended to nearly 200,000 other state employees. See 14 N.Y.3d at 255. This Court acknowledged this differential treatment but nonetheless rejected the discrimination claim because “judges are not the only state employees whose salaries have not been adjusted”; in addition, “the Governor, Lieutenant Governor, members of the Legislature and other constitutional officers”—fewer than three hundred state employees in total—had also not received these salary increases. Id. at 256. The class of more than 12,000 comparably treated employees in this case well exceeds the class that this Court found sufficient in Maron to defeat a discrimination claim under the Judicial Compensation Clause. Plaintiffs assert (Pls. Br. at 45-47) that judges were not in fact treated the same as M/C employees because, in the same 2011 session law that reduced the State’s premium contributions, the 36 Legislature also gave the Director of the Division of the Budget discretion to authorize two lump-sum payments to M/C employees. But, as plaintiffs concede (Pls. Br. at 47), M/C employees have never received these payments because the Director has never authorized them. The “mere promise of possible lump sum payments” (Pls. Br. at 47) thus does not establish that M/C employees were treated more favorably than judges because the bottom line is that neither M/C employees nor judges actually received anything in exchange for the State’s premium- contribution reductions. It is immaterial whether the absence of some compensatory benefit occurred through administrative inaction (as for M/C employees) or legislative inaction (as for judges). In fact, the never-realized promise of lump-sum payments only highlights that M/C employees were ultimately treated less favorably than judges. The lump-sum payments were part of a broader legislative effort to bring M/C employees’ salaries into parity with those of unionized employees. See App. Br. at 22-24. But judges had no need for any such parity efforts because the 37 Compensation Commission was already dedicated to reviewing and recommending judicial salary increases. While the Director of the Division of the Budget never exercised his discretion to provide M/C employees with the lump-sum payments that were supposed to be part of their salary increases, the Compensation Commission has twice exercised its discretion to substantially increase judges’ salaries by significant amounts—ultimately increasing the salary of a Supreme Court justice by approximately forty-one percent between 2011 and 2016. (Compare R. 148-151 (noting Supreme Court justice’s salary of $136,700 in 2011), with 2015 Commission Report at 12 (raising salary to approximately $193,000 as of April 1, 2016).) The identical (and arguably better) treatment of judges compared to more than 12,000 nonunionized M/C employees is thus sufficient for this Court to reject plaintiffs’ discrimination claim without even considering the State’s treatment of unionized employees. But this Court should reject plaintiffs’ discrimination claim even if it were to compare judges to unionized employees 38 because plaintiffs have failed to identify any material difference in the treatment of these two categories of employees. First, plaintiffs incorrectly assert (Pls. Br. at 41-43) that judges were subject to discriminatory treatment because unionized employees could “opt out of the reduction in premiums,” whereas judges could not. But no individual employee whose union has agreed to a new collective-bargaining agreement can excuse himself or herself from the reduced premium-contribution rates—to the contrary, the reduced rates are mandatory for these employees. Thus, contrary to plaintiffs’ contention (Pls. Br. at 40), the slight reduction in the State’s premium contributions is nothing like the unconstitutional Social Security tax legislation in Hatter, which gave “nearly every current federal employee, but not federal judges,” the option “to avoid the newly imposed financial obligation” altogether by taking advantage of statutory exceptions not available to judges. 532 U.S. at 572-73; see also id. at 563-64. Here, the opposite is true: nearly all state employees—including both judges and the overwhelming majority of unionized 39 employees—are unable to avoid the higher premium prices that resulted from the State’s reduced contribution rates. The unions of approximately two percent of state employees have not yet agreed to new collective bargaining agreements, but ongoing negotiations between these unions and the State cannot fairly be characterized as the unions having simply “opt[ed] out of the reduction in premiums” (Pls. Br. at 41). Collective bargaining is a complicated and often long process that requires mandatory negotiation of all terms and conditions of state employment. Until a new agreement is reached, the union has not opted in or out of anything, but is instead continuing to negotiate and balance many potential changes—both positive and negative—to any number of employment terms. This waiting period is all that has occurred here for the small number of employees whose unions have not reached new collective bargaining agreements. While these employees are not yet subject to the changes in premium rates, they also are not yet subject to any of the potential benefits that a new agreement might bring, such as salary increases in 2014 and 2015, which the 2011 legislation at issue here authorized for those 40 union members whose unions had reached new agreements with the State. See Ch. 491, pt. A, § 9, 2011 McKinney’s N.Y. Laws 1363, 1368-70. Thus, contrary to plaintiffs’ assertion, there is no meaningful sense in which unionized employees currently have the option to avoid the premium-contribution reductions at issue in this case. Given that fact, plaintiffs’ “opt out” argument boils down to the contention that judges were treated differently simply because they did not engage in collective bargaining. But if the mere fact that the State must negotiate with unions were enough to create unlawful discrimination against judges, then the State could never extend to judges any changes to premium prices or other benefit terms that are collectively negotiated and applied to other state employees. Because the Taylor Law does not apply to judges, judges will always be subject to benefit changes without having the same opportunity as union members to negotiate over such changes. If accepted, plaintiffs’ theory would thus place the State in the untenable position of never being able to treat judges and 41 other state employees equally with respect to benefit prices and terms. Second, plaintiffs argue (Pls. Br. at 39-41, 45) that judges were treated unequally because they “received nothing in return” for the reduction in premium contributions, whereas unionized employees received certain layoff protections. But as the State explained in its opening brief (App. Br. at 56-57) this argument fundamentally misunderstands the relevant analysis, which compares judges and other state employees with respect to the “financial burden” imposed, Hatter, 532 U.S. at 573, and not with respect to every aspect of their job terms. Here, as plaintiffs concede, the State’s reduction in premium contributions applies equally to judges and virtually all other state employees. That unionized employees may have received other benefits is thus immaterial. In any event, consideration of the broader context through which the State enacted the premium-contribution reductions at issue here would not help plaintiffs’ case because judges in fact emerged better off than unionized employees—thereby 42 undermining any claim of discriminatory harm. The benefit that unionized employees received—layoff protections—is one that judges already enjoy under the Constitution. See N.Y. Const. art. VI, § 23. And unionized employees were required to make a number of other concessions during the collective-bargaining process, such as salary freezes and unpaid furloughs, that judges have never been forced to accept.12 12 Plaintiffs argue that this Court should ignore judges’ constitutional layoff protections in evaluating whether the Legislature has discriminated against judges, but their argument is meritless. Plaintiffs attempt to analogize the changes in premium contributions here to unionized employees being deprived of a dollar but being given an apple (i.e., layoff protections), while “the State forcibly took a dollar from the [j]udges who already had apples.” Pls. Br. at 47-48. But plaintiffs do not explain why, under their analogy, judges would be “singled out . . . for unfavorable treatment,” Hatter, 532 U.S. at 561 (emphasis added), if, as plaintiffs posit, they are subject to the same financial burden and end up with the same apple as other state employees. More fundamentally, plaintiffs’ suggestion that judges and unionized employees now have the same “apples” ignores significant and critical ways in which, as explained in the text, judges continue to be more favorably treated than unionized employees. This broader and more nuanced context rebuts plaintiffs’ suggestion that judges have been uniquely disadvantaged here. 43 Ultimately, judges were subject to only one of a broader range of austerity measures that fell more heavily on others, and they were not excluded from any special benefit granted only to other employees. Because the State thus did not “singl[e] out judges for disadvantageous treatment,” Hatter, 532 U.S. at 576, plaintiffs have failed to establish a claim for discrimination under the Judicial Compensation Clause. CONCLUSION For the reasons explained above, this Court should reverse the interlocutory order of the Appellate Division, First Departinent and the final judgment of Supreme Court, New York County, and dismiss plaintiffs' complaint or grant summary judgment to defendants. Dated: New York, NY April 27, 2016 BARBARA D. UNDERWOOD Solicitor General STEVENC. Wu Deputy Solicitor General JUDITH N. VALE Assistant Solicitor General of Counsel Respectfully submitted, ERIC T. SCHNEIDERMAN Attorney General of the State of New Yorh Attorney for Appellant By:22~~:;-"-c (