Court filings issued by the California Governor’s Office indicate Gov. Jerry Brown supports the idea of the state reducing certain pension benefits of current public workers, not just those of future hires. [Sac Bee]
In 2012, Brown signed retirement benefit reform legislation known as the Public Employees’ Pension Reform Act. The law restricted pension benefits for public employees in California who are hired after Jan. 1, 2013, and required those workers to contribute more toward their pension plans than previous hires.
The law prompted legal challenges from several public employee unions, with some of the cases now on their way to the California Supreme Court. At stake in the court cases is a host of issues relating to particular retirement benefits.
But, the cases have also led to a review of the so-called “California rule,” a legal precedent in the state that has barred Sacramento and local governments from reducing pension benefits for existing employees that they have offered over the last 60 years. Siding with Brown’s lawyers and against the unions, judges have maintained in a cluster of recent court decisions that public employees are entitled to reasonable pensions, but not necessarily the ones that are allocated based on the most generous formulas.
Brown’s office, which has taken the responsibility for the pension cases away from the California Attorney General’s Office, has embraced the rulings challenging the “California rule.”
“Many legal experts have criticized the rigid inflexibility of the union’s position, pointing out that it is contrary to contract clause principles, inconsistent with general contract and economic theory, and effectively depresses the salaries and benefits of new generations of public employees,” Brown’s attorneys stated in a legal brief filed in an ongoing case involving a Cal Fire union.
The governor’s office is battling Cal Fire Local 2881 in court over “air time” credits, a scheme in which workers can purchase extra years of service that are credited to their pensions. The 2012 legislation signed by Brown barred CalPERS, the state retirement system, from selling “air time” credits, effective Jan. 1, 2013.
Unions consider that aspect of the pension reform law to be a violation of the “California rule,” as it affected employees who began their jobs before the legislation took affect.
In the Cal Fire case, justices at the state’s 1st District Court of Appeal said in a ruling that workers are “entitled only to a ‘reasonable pension, not one providing fixed or definite benefits immune from modification.”
Currently, numerous government agencies in California are grappling with a recent decision made by the CalPERS board to lower its investment forecast, thus forcing state and local to agencies to contribute more funds to their pension plans. Locally, the city of SLO recently acknowledged that it is faced with an approximately $9 million budget shortfall over the next three years, largely due to pension fund shortcomings, and it may have to cut and/or charge more for city services as a result.