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Are Public Pensions a "Vested Right"?
Chris Panteli of Global Pensions reports, Public pensions a "vested right", CalPERS report finds:
Legal
analysis carried out by the California Public Employees’ Retirement
System (CalPERS) has ruled that pension promises made to current and
retired members are a “vested right” and protected under State and
federal laws.
The
analysis, "Vested Rights of CalPERS Members," articulates provisions
found in the contract clauses" of State and federal laws, concluding
that the laws establish that public employee retirement benefits are a
form of deferred compensation and part of the employment contract.
"The
law is very clear - a promise of a pension made by a public employer
to its employees is a promise the employer must keep," said Anne
Stausboll, chief executive officer for CalPERS.
"We prepared this
analysis for two reasons. First, to reaffirm the provisions of the law
regarding the nature of our members' pension rights; and second, to
outline CalPERS roles as fiduciaries and stewards of the pension fund.
We need to ensure that our members' vested rights are honoured."
CalPERS
analysis looked at more than a dozen California appellate cases over
the last 70 years and identified several rules which have emerged from
court decisions, including:
- Employees are entitled to benefits in place during their
employment, meaning they obtain a vested right to the provisions of the
applicable retirement law that exists during the course of their
public employment.- RRetired and inactive members have vested rights to the benefits promised to them when they worked.
- Employees are entitled only to amounts reasonably expected from
the contract. Vested rights protection does not extend to unreasonable
or unanticipated windfalls.- The State's "emergency" powers are extremely limited and cannot
be used to reduce the benefits that have been promised. The State's
emergency powers do not enable it to solve its budgetary problems by
eliminating or reducing the long-term benefit promises it has made.- Future employees have no vested rights.
- Only lawful contracts with mutual consideration are protected by the contract clause.
- Active employees' vested rights may be unilaterally modified only under extremely limited circumstances. Modifications
must be reasonable and must bear some material relation to the theory
of a pension system and its successful operation. Changes that result
in disadvantage to employees generally must be accompanied by
comparable new advantages.The report added if a pension
reform proposal for current employees were to be enacted it would still
have to "pass muster" under the Contract Clause of the California
Constitution. If a proposed amendment eliminated the State
Constitution's Contract Clause, the Contract Clause in the US
Constitution would still give rise to the same protection of vested
rights as the State Constitution.
"The assumption by authors of
pension reform proposals that amending the State Constitution will
avoid a constitutional challenge to altering vested retirement benefits
is misplaced," said Peter Mixon, CalPERS General Counsel.
"Without
consideration of State and federal rules, well-intentioned proposals
may only lead to increased litigation and administrative costs that
will further increase the costs of providing benefits."
You can download the CalPERS' report by clicking here.
There is no question that retired, inactive and active members have
more "vested rights" than future employees. They paid into their
pensions, contributed part of their wages, and expect their employer to
deliver on the pension promise. Having said this, when the money runs
out, like it did in Greece, all bets are off and even if these "vested
rights" are protected under the Constitution, the government can turn
around and cut benefits and repeal all vested rights.
In other
words, when it comes to pension benefits, public sector employees have a
lot more protection under the law than their private sector
counterparts but anyone who thinks that these "vested rights" are
immutable and enforceable under any circumstance is simply deluding
themselves. When catastrophe strikes, the only "vested right" you have
is the right to survive as best as you possibly can. If the money runs
out, you will see deep cuts in your pensions.
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CalPERS back in the day of Pete Wilson and when the GOP still had a little power in CA was the poster child for a fairly well run pension plan. Now it is a cookie jar for Dems, unions and their cronies like Ron Burkle and others to loot.
Leo, I'd like to introduce you to the "Windfall Pension Tax" of 2013. Because your money can always be their money.
Unrealistic pensions are just as illegitimate as a will signed by an incompetent testator....void. A municipality has no right to give other people's money away in a reckless manner:
"According to a [Newport Beach] city report on lifeguard pay for the calendar year 2010, of the 14 full-time lifeguards, 13 collected more than $120,000 in total compensation; one lifeguard collected $98,160.65.
More than half the lifeguards collected more than $150,000 for 2010 with the two highest-paid collecting $211,451 and $203,481 in total compensation respectively....Lifeguards are able to retire with 90 percent of their salary, after only 30 years of work at as early as the age of 50."
http://orangepunch.ocregister.com/2011/0...
These contracts need to be rescinded and renegotiated.
There is a lot of common law that states otherwise.
Oregon PERS retirement system over-promised and had financial problems in the early 00's. The court decided that the benefits promised were not achievable and ordered a reduction of approximately 1/3 of future benefits.
I am not an expert at the details but clearly there was no 'federal' right for public employees in the Oregon case at that time...
Just sayin'
Time for a ballot initiative.
When the hyperinflation starts, this will all be moot. No?
How legal are fraudulent contracts?
Defined Benefit = Fraud.
Simply stating a benefit does not make it truthful. Show me the math and you will show the fraud
Just put a workman's lien on "State of California" property and sieze the shit if they don't honor the pension.
It is a clear fact that social security benefits can be altered by congress.
Of all the "promises" any government entity makes to it citizens from a pension perspective
this one has to stand as the biggest and it clearly extends no "promise" beyond what is
economically and legislatively, possible.
Calpers believes its pension promise is different even though the only aspect that is different is that its promises were negotiated by the state with its employees. Well, good luck with that notion. If state workers imagine they will get what they bargained for even though it leads to a bankrupt entity, they are entitled to their delusuions of constitutional perfection.
Federal government coerces taxation to pay into social security pension. Pension subject to change at any time. Pensioners might get something.
State negotiates promise of pension with workers. State reaches bankruptcy. Pensioners
can get something or nothing. What do you think they'll chose?
Calpers is whistling past the graveyard. This issue is obviously headed to the SCOTUS, where it will be decided in favor of the taxpayer.
"Well Gordon" in creepy computer voted in Resident Evil or Half Life. As you known in Racoon City - the union zombies don't die so easily. SCOTUS may do the right thing but you never know in ObamaLand.
A derivative of a delusion. Good luck with that.
That which cannot be paid, won't be.
I am not sure if this story is true but if than it's the biggest government load of shit I ever heard of
http://rt.com/usa/news/california-rescue-workers-watch-man-drowns/
I hope they enjoy their big fat government pension once they retire
Besides, the math doesn't work out on your average annual pension, unless you kill off quite a number of the Seniors. Oh, not to mention the Baby Boomer generation.
A right? LMAO
There should be Rights & Obligations the unsuspecting ponzi scheme user (public leech) should be subject to, like say, primae noctis - if you payed taxes, but didn't take out anything in benefits, and you lived next door to a public employee, you could have a first cornholing with their daughter(s).
Rights. My rights, bitch.
Vested, smeshted. There is no "Constitutional Guarantee" as is espoused by most CA employees with whom I've spoken. Then they defer... well, really don't defer or even admit changig thier positions... to the contractual promises as enshrined in state and federal law.... which has naught, fuck all, zero to do with anything other than a contract.
And we all know what that's worth these days, especially when the rights of contractually binding agreements are held in such sanctity by the Federal gubamint as exemplified t=in the absolute butt fucking of the senior secured, senior and junior debt holders of GM and Chrysler in favor of Unsecured never had even a Promissory Note of the unions to recieve equity in the firms.
Nope, and it's gonna be renegotiated. Especially when the real numbers (about 50 to 75% higher than reported) come out as to the real cost to Joe Sixpack.
I have no sympathy for what the public sector has done for themselves behind the scenes.
Great post!
I thank all the Goverment employees for trusting that their pension will actually be worth something. Is keeping your money out of the PM market and into coke money and hookers for Bay and Wall street fraudsters a credible plan?
It will be interesting to see how this plays out. My wife is a CA teacher and has 10 years until retirement. Obviously, she is hoping for what she believes she was promised and earned, but I have suggested to her, that in fact if she gets 50% of that amount, she will be lucky. The OP's point that existing beneficiaries may have drained it all away prior to her retirement, in the case of CalPers investments collapsing with the market is well put. I guess we will be working forever.
Is it possible/worthwhile to consider a lump sum payment from CalPERS?
Anytime you give your money to the State to hold in trust, you lose control and access to it at the State's discretion. The viability of the State supercedes your claims.
The law is infinitely flexible and worse, as it has no police component, completely impotent in the face of legislative or executive inaction. Just ask the Native Americans and all those Marshall decisions, not to mention treaty law.
If pensions are paid, it will be through complete economic recovery and a sustainable progression(fat chance) or through grossly inflated dollars diminishing any return.
This is what comes from government. There is never any other result. If you are going to maintain governments, then you must accept the consequences. Enjoy the good times, but prepare for the bad.
Laws and court decisions are The Fatal Conceit in full display, i.e. the idea that "man is able to shape the world around him according to his wishes."
http://www.amazon.com/Fatal-Conceit-Errors-Socialism-Collected/dp/0226320669
California retirement is bananas. It is un-do-able. But back in it's hay day, California legislators carved out the most ridiculous retirement plan ever. Oftentimes it pays "retired" workers nearly 100% of their salary after working only 25 years. They collect that for 35 years or so. Work 25, get 35 free. And we think the Greeks are foolish. Perhaps the Californians dress up and ride bikes in Woodside when their public service days are over.... http://thecivillibertarian.blogspot.com/2011/07/idiots-on-bikes.html
The judges who make these decisions have their own defined benefit pensions to protect.
Maybe that North/South California setup is the stealth solution. Two new States, two new State Constitutions. Screw the amendments. Cali governance is strictly supervised by public sector unions at all levels. They outsmarted the snoozing commoners by barricading the backdoor exit before the insolvency fire even ignited. Then made sure their Founder and Dali Lama, Jerry Brown, got hoisted into the State's driver's seat.
Take all of it apart and start over...the only remaining solution.
but!! but!!! i have vested rights. This piece of paper says i have a right to get paid, who cares if the jar is empty.
pay up or else.
The jar will always be empty... when it comes to social programs. Why do you think the US has never been out of debt? Ans. So that this can always be said.
However, if General Warmonger`s baby needs a new set of Mach2 wheels there will always be enough money for that because the world needs to be `defended` by the altruism of the US.
Just ask the bond holders of chysler about how easy the rules can change?
Just ask the bond holders of chysler about how easy the rules can change?
In other words, when it comes to pension benefits, public sector employees have a lot more protection under the law than their private sector counterparts but anyone who thinks that these "vested rights" are immutable and enforceable under any circumstance is simply deluding themselves. When catastrophe strikes, the only "vested right" you have is the right to survive as best as you possibly can. If the money runs out, you will see deep cuts in your pensions.
They only have to be more immutable than taxpayer and private property rights Leo.
Which way do you think the fed/muni governments will lean on this one?
There can be no "vested right" to anything which simply does not exist.
I have a dollar bill. To what does that give me a vested right?
Broadly speaking, the underlying issue is to what extent can we in the present impose obligations on those who will live, work, and pay taxes in the future? We have gained benefits in the present by designating the future as the bag-holders.
We see this principle at work in Europe now. There is a limit on how much future burden you can impose on a population. At the margin, they will evade taxes, become loafers, or simply leave. This is true of the current crisis countries (Ireland, Portugal, Iceland, Greece) which have long histories of pushing their most productive young people abroad.
The Arbitrator said it should exist.
Mitch McConnell wants government to pay all its obligations.
It was in the contract.
My mother and father relied heavily on the promises of GM bonds.
Whats good for GM is good for the country. Fuck GM.
Reality rules.
The work required to create the deductions from every paycheque is definitely real, so the obligation of recompense for that labour exists.
If it was simply a matter of solvency and not priority, the 'bottom line' says there hasn't been any money for ANYTHING since the last time the US was national debt-free.
The bottom line.
You will eventually witness courts and judges imposing taxes. When that happens, you will start to see judges shot down in the street, or hanging from lampposts.
The most realistic approach for pensioners might be confiscation of state property, but they will be in line with other creditors, too, so that will recover very little that is going to be lost.
Courts and judges routinely impose taxes and costs... have you ever had any run in with traffic court or district/municipal court? It's a pinball game with indigents... they bounce off all the bumpers and the state gets the money... at least, on the surface... what those involved with are too stupid to figure out is that the prison system costs far more than the fines imposed... as well as the societal costs of broken families, even if temporary. Of course, this doesn't matter because everyone is on the take, albeit with differing levels of involvement and foresight.
They also routinely enforce notes/mortgages... and federal/state tax liens... and all sorts of things...
These days are here and have been for a long, long time... I suggest you revise your thesis. (I think it may be correct, but the economy has to continue to deteriorate and our tribute payments to those involved so as to keep them from breaking shit/killing people, e.g. welfare, SNAP, et al, will have to be stopped before any of this is triggered).
Those are fines that are levied by legislatures and enforced by courts. I am talking about judges eventually imposing (or trying) income, sales, and property taxes to pay off bankrupt pension plans. As the society declines, this will happen eventually.
If that occurs, it will only be after collapse and the restructuring of a new government... because it is literally the antithesis of our present system...
My question is: in the (purely hypothetical) event of a state default, where do pensioners stand in the creditor hierarchy?
"where do pensioners stand in the creditor hierarchy?"
Wherever the crooks who run the country want them to stand, depending on their connections.
The government PBGC sucked up a couple billion of already contributed funds from United Airlines when it allowed the management out with millions, and in the process double screwed the employees who were ESOP owners left with worthless stock. The benefits are significantly reduced and it appears that the government maintains that the reduced pensions are not a absolute guarantee.
Whereas, to my understanding, in the GM bankruptcy Obama dumped GM salaried white collar pensions on the PBGC at reduced levels and made the UAW union pensions whole with TARP.
It's all a FUBAR and it deserves to fail big-time.
The answer to your question is the entire reason CALPERS commissioned this "study" in the first place. They want to put themselves on the same legal plane as bondholders. Taxpayers are supposed to decide who gets paid first, at the ballotbox, not the courts, btw.
I recently had a friendly argument with a liberal friend of mine who lives in CA. He was insisting that benefits had to be paid because they were mandated either by the legislature or the courts. My response was you can mandate whatever you want, but if there isn't any money those mandates don't mean squat. I think this CALPERS study falls into that realm of wishful thinking.
Your question presumes a quick default. We will have (have had) domestic default before international default. This means, where budgets can get cut, they will (decrease in entitlements, medicare coverages, etc.)... until, inevitably, they can be cut no more and we get to negotiate with our international creditors.
In short, by the time we get around to "default", the pensions may have been largely curbed...
The solution is simple--No more Defined Benefit Plans; only Defined Contribution. Let them be professionally managed or individually, but in no way should their be potential liablity outside of market performace of funds. Actuaries should not be used to predict investment performance.
We know empiracally that this is the only way that is sustainable and that this is the way the Federal government has been transitioning for the last twenty years therefore, you are junked. Darn your common sense!
Abolish all these expensive plans where the employee has no stake in the contribution. Let the employee contribute and share in the building of his onn future benefit. Why should employers (or taxpayer for that matter) be responsible for all the costs of these plans esp when brokers pump up costs, churn, etc.
Keep it simple with a simply 401(k) or similar imho with the employer matching the employee's contribution in some reasonable ratio.
We all feel strongly that we have been cheated, but cheating others that have been cheated seems a little unfair to me. Some state and local pension systems should be renegotiated due to their being unfair to the taxpayers, but other public pension funds are not necessarily that generous. For example, members of some NYC area law enforcement ran up their overtime in their last year of service so that they retirement, for the rest of their lives, exceeded their service pay. On the other hand, the Federal FERS retirement system provides you with one third of your top three years. If you were earning $100k (and that's base pay) in your last three years, your pension is $33k. Not only that, if you want your wife covered in the event of your death, you must accept considerably less.
This issue is obscured by side issues, like jobs that don't really challenge the workers, whether benefits like medical considerably change the deal, and whether the real issue is the governments just hired too damn many people to do too many things that government should never have been engaged.
From my perspective, the federal government is too big, too involved in state and local matters, and drains off too many people from top educational institutions, thereby justifying higher pay when a turnip would be as able to push their useless paper. However, I don't blame the individuals involved who entered government service with backgrounds that could have earned them a lot more on the outside. They are going to be paupers in retirement, along with all the idiots who should never have been hired by the government.
In the end, we were all equally screwed (except the bankers and insiders)
If a government entity has a requirement for
a balanced budget, how can it incur uncapped
(defined benefit) pension obligations?
These obligations are can't be charged to the
current budget year since it is an unknown
amount and it doesn't have the authority to
issue promises for future budget years.