California Supreme Court Set For Ruling That Could Cut Pensions For Public Workers

For decades now public pensions have been guided by one universal rule which stipulates that current public employees can not be 'financially injured' by having their future benefits reduced.  On the other hand, that 'universal rule' also necessarily stipulates that taxpayers can be absolutely steamrolled by whatever tax hikes are necessary to fulfill the bloated pension benefits that unions promise themselves.

Alas, that one 'universal rule' may finally be at risk as the California Supreme Court is currently considering a case which could determine whether taxpayers have an unlimited obligation to simply fork over whatever pension benefits are demanded of them or whether there is some "reasonableness" test that must be applied.  Here's more from VC Star:

At issue is the "California Rule," which dates to court rulings beginning in 1947. It says workers enter a contract with their employer on their first day of work, entitling them to retirement benefits that can never be diminished unless replaced with similar benefits.

It's widely accepted that retirement benefits linked to work already performed cannot be touched. But the California Rule is controversial because it prohibits even prospective changes for work the employee has not yet done.

The ballooning expenses are an issue that Gov. Jerry Brown will face in his final year in office despite his earlier efforts to reform the state's pension systems and pay down massive unfunded liabilities.

His office has taken the unusual step of arguing one case itself, pushing aside Attorney General Xavier Becerra and making a forceful pitch for the Legislature's right to limit benefits.

"Lots of people in the pension community are paying attention to these cases and are really interested in what the California Supreme Court is going to do here," said Amy Monahan, a University of Minnesota professor who studies pension law.

"For years, self-interested parties, overly generous promises whose true costs were often shrouded by flawed actuarial analyses, and failures of public leadership had caused unsustainable public pension liabilities," his office wrote. A ruling is expected before Brown leaves office in January 2019.

Meanwhile, it's not just California taxpayers that have an interest in the Supreme Court's decision as twelve other states also observe a variation of the 'California Rule', said Greg Mennis, director of the Public Sector Retirement Systems project at Pew Charitable Trusts. One of them, Colorado, has walked it back a bit, he said, requiring "clear and unmistakable intent to form a contract before pensions will be contractually protected."

While a change to California's interpretation of its rule would not automatically change legal precedents in other states, it could provide the catalyst for lawmakers to test changes that they previously considered unfeasible.

Pension

As we pointed out earlier this year, the case currently before the Supreme Court comes after a lower court ruled that "while a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension." Here's more from the Los Angeles Times:

The ruling stemmed from a pension reform law passed in 2012 by state legislators. The law cut pensions and raised retirement ages for new employees and banned “pension spiking” for existing workers.

Pension spiking has allowed some workers to get larger pensions by inflating their pay during the period in which retirement is based — usually at the end of their careers.

In a ruling written by Justice James A. Richman, appointed by former Gov. Arnold Schwarzenegger, the appeals court said the Legislature can alter pension formulas for active employees and reduce their anticipated retirement benefits.

“While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension,” wrote Richman, joined by Justices J. Anthony Kline and Marla J. Miller, both Gov. Jerry Brown appointees.

Of course, 'reasonable' can be a tricky term to define and for most union bosses it is synonymous with 'MOAR'....the only question is does the California Supreme Court agree?

Comments

greenskeeper carl MGTOW_MONERO_XMR Fri, 12/29/2017 - 18:34 Permalink

Somehow or another, the pensions will be paid right up until the point of complete collapse. California is nothing but a giant graft machine run by the public sector employees for the public sector employees, and to hell with everyone else. And, its hardly alone. I'm sure there are some people following this pretty closely in places like Illinois.

In reply to by MGTOW_MONERO_XMR

Gap Admirer RiderOnTheStorm Fri, 12/29/2017 - 19:09 Permalink

It's about time. You can't tax the people who pay for gubmint at 150% for very long.  "Public servants" need to go back to being public servants.  Lower pay and retirement because the job is guaranteed for life no matter performance.  Now the state needs to do the right thing and dramatically lower gubmint pay and benefits.

 

Oh, and read my blog here XXXXXXXXXXX.  I need the money and comments sections are free advertising.

In reply to by RiderOnTheStorm

Mr. Universe The_Juggernaut Sat, 12/30/2017 - 11:48 Permalink

I understand that about 75% of our State government here in California in unnecessary.  Whose fault is that? The people who vote in the politicians that require all these workers that's who. Instead we get finger pointing at the people, whom if were representing you, would make sure that you get a decent contract.

On the other hand, that 'universal rule' also necessarily stipulates that taxpayers can be absolutely steamrolled by whatever tax hikes are necessary to fulfill the bloated pension benefits that unions promise themselves.

Terrible reporting in this quote. I've seen contract negotiations for over 30 years now. Not once did unions promise themselves anything, let alone tax hikes. That my friends goes back to the same people that I mentioned previously. LOOK IN THE FREAKING MIRROR. County hospital employees could have made 25-30% more in the private sector, but felt the security and pension was worth the trade off. Not only that, but working at a county hospital, serving the public, seemed like a good thing to do at the time. Instead the system is overloaded with illegal aliens, along with the drug addicts and other miscreants. It's amazing how much more health care they need, all on our dime. My favorite though are those "entitled" foreigners who believe "never take a bus when the county will pay for a taxi". However, some live by the creed of "never take a taxi when the county will pay for an ambulance".  Steps have been made and new hires not only get crappy pay (but great experience) but a lousy pension now too. Still the problem remains the same, tax and spend, spend and tax. I'm really looking forward to when Cal implements it's new pay by mile driving tax. The whole thing is going to burn down, all according to plan.

 

In reply to by The_Juggernaut

Mr. Universe meterman Sun, 12/31/2017 - 16:38 Permalink

Please, tell me in your clarity why? I don't get the firetruck comment either. I haven't lived in all US states, but I was born and raised in Nor Cal and the place has changed, not for the better. Time to leave, as trying to make it better is met with hostility and scorn.  Funny thing is, while having contributed over $250K to the pension fund, we count on nothing, and have prepared accordingly.

In reply to by meterman

Jo A-S Four Star Sat, 12/30/2017 - 04:21 Permalink

Likewise in the UK.  The STATE pension (ie old age pension) is a Ponzi scheme and the public sector pensions are massively underfunded.  The UK government is slowly (too slowly) trying (and failing) to sort out the problem.  But, vested interests, namely unions, are consistently fighting any change.......

In reply to by Four Star

SoDamnMad greenskeeper carl Sat, 12/30/2017 - 10:28 Permalink

I got out of CA when I saw the pension corruption.  Things like the giant correctional officers association which loves convictions and the need to build more prisons for more jobs that can turn over more votes at election time. Then get "disabled" in a melee and convert unused vacation time, super overtime and other into a huge monthly check which will be on top of the other state job (maybe with Caltrans). Worse maybe is the university system and all the deans and assistant deans pulling down $700,000. salaries.

In reply to by greenskeeper carl

Endgame Napoleon greenskeeper carl Sat, 12/30/2017 - 13:57 Permalink

Ummm, who is fighting the fires out there, the boundless, raging fires that are engulfing homes all over CA and, no doubt, raising insurance rates? Is it public employees? In that state more than most, that is one of the dangerous public-sector jobs, unlike these jobs administering layers of welfare to single moms and immigrants, but the fires are not being fought adequately by these public employees, nor did CA’s building inspectors @ $69k prevent that warehouse fire that killed 36 people. 

In reply to by greenskeeper carl

The Repentant … greenskeeper carl Tue, 01/02/2018 - 14:06 Permalink

Exactly, and the same is true everywhere else.  Pensions are so big that cutting benefits will have a massive impact on those slated to receive such big pensions.  Pensions are so big that there's no way to trim around the edges.  And since the government is the #1 employer in so many locales, there will never be the organized political will necessary to stop it.

 

 

In reply to by greenskeeper carl

steelrules Fri, 12/29/2017 - 18:41 Permalink

Government workers suffer the most cognitive dissonance, try to mention that their pensions will be stolen and they look at you sideways like you're crazy. The gravy train is ending, and I'll enjoy watching crash.

 

Pazuzu Fri, 12/29/2017 - 18:43 Permalink

I drew an early retirement from Retail Clerks and they threaten me every year, telling me that theoretically they are paying me more than the minimum required by law now that the Fund is in 'Critical Status'.

So I'm long tubers; Magic Mollies and German Butterballs with a diversification into French Fingerlings. I move seed capital into 60 dirt filled tires every spring and the investment grosses about 200 lbs. Will trade for bits of coinage but not Bitcoin...

serotonindumptruck Fri, 12/29/2017 - 18:52 Permalink

There may be a conceivable limit to taxpayer funded state pension plans, if esteemed state Supreme Court officials are prepared to recognize the reality that infinite growth on a finite planet is impossible.

This is one of those simple legal arguments where prima facie evidence is overwhelming.

When there aren't enough slaves...err...taxpaying citizens required to provide a six figure retirement income to state workers who put in a grueling 20 year career as a state trooper, and then retiring at the ripe old age of 42, then benefits will simply have to be cut...by 75 percent.