In a way, groups on both sides of the issue can declare victory in this week’s California Supreme Court ruling in CalFire Local 2881 v. California Public Employees’ Retirement System.
Pension reformers, including Citizens for Sustainable Pension Plans, were pleased that the appeals court’s decision on “air time” was upheld. Public employee unions and their attorneys were relieved to see the “California Rule” left untouched.
The Marin IJ article (March 5) adopted a negative interpretation of the ruling, stating that neither side got what it wanted. The comments CSPP submitted, upon request, did not fit that narrative and were not used.
Based on the facts of the case, most informed observers anticipated the narrow finding that was ultimately given — a focus only on air time, i.e. the purchase of additional work credit years without actually working those hours.
This is a brief definition of the California Rule: From the first day a public worker enters a contract with their employer, the pension benefits they are offered as part of that contract can’t be diminished unless replaced with similar benefits. California courts have upheld this “rule” for over six decades.
CSPP did not expect to see the California Rule addressed in this decision, so we were neither surprised nor disappointed. We were relieved that in its first hearing of union challenges to recent favorable rulings for pension reform, the Supreme Court upheld the lower court’s ruling concerning the air time provision in the Public Employees Pension Reform Act, known as PEPRA.
The interesting thing about the upcoming Marin Association of Public Employees case, the first to be challenged and upheld by the appeals court, is that the judges went further in their decision than anyone expected.
MAPE’s opening brief stated: “Public employees earn a vested right to their pension benefits immediately upon acceptance of employment and … such benefits cannot be reduced without a comparable advantage being provided.”
The appellate court rejected this rigid interpretation of the California Rule and upheld PEPRA.
The court’s finding also stated: “As will be shown, 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.”
In the MAPE case, the Marin County Employees’ Retirement Association board voted to implement AB 197, effective Jan. 1, 2013, and announced a new policy for the calculation of retirement benefits. No longer would standby pay, administrative response pay, callback pay, cash payments for waiving health insurance and other pay items be a part of the calculation of members’ final compensation for all compensation earned.
Citizens for Sustainable Pension Plans feels confident that the state Supreme Court will ultimately be required to rule on the legitimacy of the California Rule in one of the five remaining cases before them.
We hope that it will.
To date, the California Public Employees’ Retirement System has unfunded liabilities totaling $140 billion. The California State Teachers Retirement System has unfunded pension liabilities of $107 billion.
Marin County’s unfunded liability as of June 30, 2018, was $211 million, plus $91 million remaining on its pension obligation bond, for a total of $302 million. The annual costs as of that date were $46 million for its contributions, plus $6 million for the bond, totaling over $52 million.
One example of those pension costs is former county administrator Mark Riesenfeld’s pension, which has now reached a stunning $282,000 per year.
Schools, infrastructure and all other services will suffer unless the necessary tools are provided — and used — to stop the bleeding.
Jody Morales of Lucas Valley is the founder of Citizens for Sustainable Pension Plans, a Marin-based group pressing for public pension reform.
