California Supreme Court Rules Against Union in Pension Reform Case

On March 4, 2019 the California Supreme Court upheld a decision by state lawmakers to roll back one scheme for public workers to pad their pension, but avoided ruling on the larger issue of whether retirement benefits can be taken away once promised.

Ventura County Taxpayers Association joined with Howard Jarvis Taxpayers Association in an amicus curiae brief in the California Supreme Court in CalFire Local 2881 v. CalPERS involving the so-called “California Rule.” 

Public employee unions have argued that under the “California Rule,” no pension benefit provided to public employees through a statute can ever be withdrawn without replacement of a “comparable” benefit, even as deferred compensation for services not yet provided, and even if the Legislature determines that non-public employee citizens are unfairly suffering as a result of prior legislatures’ mistakes.  

The case challenged one of the provisions of California’s 2014 pension reform legislation (PEPRA) which has eliminated the purchase of “Airtime”.

This was the practice whereby retiring public employees could purchase “service credits” that would lengthen the number of years they worked, which would increase the amount of their pension, even though they hadn’t actually worked those additional years.

CalFire claimed that airtime was protected by the “California Rule” which they argued, prevents pension benefits from being reduced unless some other benefit of equal value is offered in return.  

The court found that the California Rule was not applicable in this case, setting an interesting precedent for other pending cases.

According to attorney and pension law expert Jonathan Holtzman, this ruling is a breakthrough. “This is the first case where the court has attempted to define a principled basis for vesting doctrine – to analyze in a rigorous manner the legal basis of the vesting doctrine.  Although it does not resolve the issue, the case leaves wide open the question whether vesting protects prospective benefits of current employees.”

Ventura County Taxpayers Association believes this is a win for pension reform. The ruling offers hope that California can take reasonable steps to ensure that our pension systems can pay all the benefits our employees have earned without driving cities, counties and school districts into insolvency.

Fiscal soundness is the real winner.  The court’s ruling, while narrow, moves pensions in California toward a more reasonable and sustainable benefit for the state’s public workers, rejecting the unaffordable and risky benefit perks that have not been earned through public service.

VCTA is a non-partisan, nonprofit organization that advocates for the rights of Ventura County taxpayers. It promotes the wise use of public funds and advises public officials regarding issues of concern to taxpayers.