The California Supreme Court’s decision to hear a Marin dispute over public pensions is a sign of the legal and financial importance of the issue.
The state’s high court has decided it will hear the Marin Association of Public Employees’ appeal of a state appellate court ruling that public agencies could make reasonable changes to the rules for pension benefits.
MAPE, the largest union at the Civic Center, and three other Marin unions, are challenging the Marin County pension board’s decision that upheld the state’s 2012 public pension reforms that tightened the lid on “spiking,” the raising of workers’ final-years’ pay, a baseline for pensions.
The county pension board is being sued because it complied with one of the state-ordered reforms. It should be commended, not sued, for following the new state law, which was a modest reform and one aimed at ending abuses of last-minute pay raises and workers in some jurisdictions “spiking” their last pension-setting pay by working overtime and adding the cashing-out years of accumulated unused vacation and sick time.
The appeals court ruling favored the pension board. That ruling potentially opens the door for high-stakes changes for workers and the pensions they are counting on. It also could mean big changes for public agencies, which in recent years have seen their costs skyrocket, contributing to budget cuts in other areas, reductions in public services, layoffs and increases in sales and property taxes and fees.
The court ruled that forbidding pension spiking did not deny workers a “reasonable pension,” which workers have relied on and deserve.
Across the state, public agencies’ pension debts are staggering. Good-faith promises were made to workers based on the confidence that income from investments would cover a large part of the cost. The recession shook the foundation of that fiscal premise — and taxpayers are paying the difference.
Marin is not immune, as local taxpayers have seen their taxes rise, public services cut and jobs lost to cover this short- and long-term cost. It is becoming clear that long-held expectations that pension-fund investment returns will cover those costs is a risky proposition. It also is clear that pay scales and benefits have risen with little public consideration of their implications to promised pensions and that workers are retiring earlier and collecting their pension checks longer than originally expected.
In some cases, including Marin, jurisdictions have more workers on their retirement rolls than than their payrolls.
At the county, there are 1,982 employees and 2,145 retirees. In San Rafael, pension-collecting retirees out-number pension-contributing workers, with 525 retirees and 349 employees.
The county’s annual pension bill in 2015 was $45.2 million, on top of salaries and other benefits. In San Rafael, that tab was $17.7 million.
At issue in the unions’ appeal is a decades-old law that defined pensions as a binding contract between workers and the state, a legal pact that essentially prohibits public agencies from reducing workers’ future pension benefits.
The appellate court in August defined that law as protecting a “reasonable pension,” not forbidding modest, legitimate reductions.
There’s a lot at stake in this ruling — both for workers and taxpayers. It is the type of case that should be decided by the state Supreme Court.
In recent years, local public leaders have complained they are hampered from making cost-cutting changes to local pensions by the legal limits set by the state.
The 2012 reforms were a modest start to fix the public pension crisis. More reforms were promised, but both Gov. Jerry Brown and the state Legislature have been quiet on that front.
State lawmakers over the years have passed legislation that has enhanced and protected public pensions, especially for police officers and firefighters. If the state can do that, it also should be able to enact cost-cutting reforms.
The state Supreme Court is poised to weigh in — and it should.