A recent court ruling may have provided an answer to public leaders who say they can’t do more to reduce taxpayers’ cost for public employee pensions.
A state appellate court ruled on Aug. 17 that local retirement plans can stem “spiking” and take other “reasonable” cost-cutting measures.
The case has Marin roots.
Members of the Marin Association of Public Employees, the county’s largest union, filed a lawsuit against the county pension board contending it illegally refused to calculate extra pay in workers’ pension checks.
MAPE argued that for those who were working in 2011, the higher pension pay was a “vested right” and could not be changed by political action.
The Marin County Employees’ Retirement Association, to its credit, did not roll over. It defended its decision to follow state law.
It won.
The 2011 state law was designed to address criticism that some workers were “gaming” the pension system, boosting their special pay — for instance, pay for serving standby and waiving medical coverage — in their final paychecks; those on which their lifetime pension benefits would be calculated.
Some agencies have allowed workers to add their overtime pay, unused vacation and sick time and housing and vehicle allowances in determining the amount of the pensions they will collect for the rest of their lives.
The short- and long-term costs of those pensions have become a major issue for government, contributing to cutbacks in local services and increased taxes and fees.
Justice James Richman, in the court’s ruling, wrote: “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.”
He cited the rising pension debts faced by public agencies across California.
The pension board deserves credit. It enacted state-approved pension reforms and defended its actions.
MAPE can still appeal and ask the state Supreme Court to overturn the ruling. It would be surprising if the ruling was not challenged. But the appellate court’s decision certainly signals the potential opening of a door that local city councils and public boards have said prevents them from rewriting pension benefits.
Observers say the ruling weakens the “California Rule,” a long-held legal standard that protected pension benefits from being reduced.
If upheld, the decision could give local agencies greater flexibility, enabling them to make what the court called “reasonable modifications” to pension formulas.
Some of the special pay was handed out by the public agencies. Some was mandated by state law. But the anti-spiking measures in the 2011 reforms spelled out what could be calculated in a retiree’s pension.
While possibly providing public agencies with greater fiscal leeway, the ruling does not change another important factor — recruiting and retaining workers in a competitive hiring environment. But it strengthens the legal foundation under the 2011 anti-spiking law and its goal of protecting public budgets from maneuvers that take advantage of pension benefits.
