The chances that a legal dispute between a Marin County union and its retirement association will determine the future of public employee pensions statewide increased Monday.
Marin Association of Public Employees v. Marin County Employees’ Retirement Association is one of six cases on the California Supreme Court’s docket that could potentially challenge the “California rule,” the legal precedent that prohibits government agencies in California from cutting retirement benefits without providing employees with comparable pension compensation.
On Monday, the court ruled on one of the cases, Cal Fire Local 2881 v. California Public Employees’ Retirement System, but handed down a narrow decision that avoided weighing in on whether it considers the California rule sacrosanct.
The decision left advocates on both sides of the issue feeling unsatisfied.
“It is disappointing obviously because the hope was the court would go beyond just that narrow finding and reconsider the validity of the California rule,” said Paul Premo, a Coalition of Sensible Taxpayers board member and former board member of Citizens for Sustainable Pension Plans.
“It’s a terribly important issue,” Premo said, “because of the financial implications for the jurisdictions that are confronted with growing pension contribution requirements and finite abilities to raise taxes to pay for them.”
Gregg Adam, one of the attorneys representing MAPE and the attorney who presented the oral argument to the Supreme Court for Cal Fire, wasn’t celebrating either.
“We’re obviously disappointed,” Adam said. “We felt that the benefit we were arguing for was entitled to constitutional protection under existing law.”
The Cal Fire case involved a right granted to many public employees by the California Legislature in 2003 to add to their years of service used for calculating their pensions by paying a one-time fee. This is often referred to as purchasing “air time.”
After the Legislature withdrew this right by passing the Public Employees’ Pension Reform Act (PEPRA) of 2013, Cal Fire Local 2881 filed a legal challenge. The union argued that air time was a vested right, one of the pension benefits that employees depend on when they opt to go into public service.
The court, however, found that additional retirement service credit is not a vested right. Chief Justice Tani Cantil-Sakauye wrote in her opinion, “There is no indication in the statute conferring the opportunity to purchase ARS credit that the Legislature intended to create contractual rights.”
“Further,” she wrote, “unlike core pension rights, the opportunity to purchase ARS credit was not granted to public employees as deferred compensation for their work …
“We therefore affirm the decisions of the trial court and the Court of Appeal, which concluded that PEPRA’s elimination of the opportunity to purchase ARS credit did not violate the Constitution,” Cantil-Sakauye wrote.
And she added, “For that reason, we have no occasion in this decision to address, let alone to alter, the continued application of the California rule.”
Adam said he was happy the court’s ruling did not jettison the California rule, but he said he couldn’t take any permanent solace from that.
“The court just didn’t get into that issue, so I don’t think we can jump up and down and say we won that issue,” he said. “We didn’t; the court just didn’t get there.
“This is not the definitive decision on the future of the California rule,” Adam said. “People are going to have wait for the sequel on that one.”
Regarding sequels, cases dealing with the California rule are queued up on the Supreme Court’s docket. The Marin Association of Public Employees v. Marin County Employees’ Retirement Association case has been placed on hold.
The case likely to be heard next is Alameda County Deputy Sheriff’s Association et al. v. Alameda County Employees’ Retirement Association. Lawyers have submitted briefs for that case and are awaiting a date for oral arguments.
Adam sees little chance that the Supreme Court will be able to avoid addressing the California rule head-on in some of the upcoming cases.
“Under the definitions that the court uses in today’s ruling, the benefits in the Alameda and Marin cases certainly qualify as deferred compensation,” Adam said. “So it seems inevitable that the California rule and its future application will be addressed in those cases.”
Marin Association of Public Employees filed suit after Marin County Employees’ Retirement Association reacted to PEPRA by excluding standby pay, administrative response pay, callback pay and cash payments for waiving health insurance from the calculation of members’ final compensation.