The California Supreme Court will hear oral arguments on Dec. 5 in a case with potential national implications as to whether pension benefits can be reduced for existing public employees.
California Chief Justice Tani Cantil-Sakauye issued a notice on Nov. 7 setting the oral arguments for the controversial case that challenges the so-called “California Rule.” The rule holds that public workers enter a contract with their employer on the day they begin employment and that their pension benefits cannot be diminished, unless replaced with similar benefits.
Courts in California have upheld the rule in a series of legal rulings beginning in 1955.
A dozen other states use a similar approach to California, holding pension benefits as a contractual right. A court decision in California would only apply to the state but California court decisions can often be a bellwether for other states. The states that follow the California approach are Alaska, Colorado, Idaho, Kansas, Massachusetts, Nebraska, Nevada, Oklahoma, Oregon, Pennsylvania, Vermont, and Washington.
The case before the California Supreme Court pits Gov. Jerry Brown and his 6-year-old pension reform law against unions representing California firefighters.
The Brown law eliminated a program by the largest US pension plan, the California Public Employees’ Retirement System (CalPERS), that allowed CalPERS members to buy “air time.” The “air time” gave workers extra years of service that was credited to their pensions even though the employees had not worked the additional years.
The case could ultimately have a bigger impact that just the selling of the “air time,” because if the court upheld the Brown administration law, it in effect would allow California officials to reduce guaranteed pension benefits if they chose to do so.
Brown, who leaves office on Jan. 7, asked Cantil-Sakauye in July to accelerate the state supreme court’s consideration of the case. A state appellate court panel had concluded that pension benefits could be reduced and thus the selling of the “air time” could be eliminated.
Back in January at a news conference, Brown stated that he anticipated that the courts would uphold his pension changes.
“When the next recession comes around, the governor will have the option of considering pension cutbacks for the first time in a long time,” he said.
CalPERS covers not only state employees but also those in many cities. In February, the League of California Cities released a report arguing that pension costs were becoming “unsustainable” for some local governments.
Lawyers for union leaders representing the firefighters have agreed that regardless of the fiscal conditions of government entities, the pensions for public employees are guaranteed and cannot be changed.
Cantil-Sakauye did not respond to Brown in July and it was unclear when the oral arguments would occur, but the court docket for Dec. 5 was . released on Nov. 7. It is unclear how long it would take for the court to issue a ruling and whether it could occur before Brown leaves office.
Tags: Benefit Reduction, California Supreme Court, CalPERS, Jerry Brown, Pension