The California Supreme Court has dealt a blow to fiscal hawks who hoped a Marin County lawsuit would set a new precedent allowing governments to renegotiate pension agreements with employees.
The court said in late 2016 it would review the lawsuit, titled Marin Association of Public Employees vs. Marin County Employees’ Retirement Association. But on Wednesday, the justices reversed course and sent the case back to the appeals court, which previously ruled in favor of MCERA.
“We’re really disappointed that the MAPE case isn’t going forward because it had very strong language about the California rule,” said Richard Tait, a spokesman for the Marin-based group Citizens for Sustainable Pension Plans.
The so-called “California rule” is a longtime legal precedent that prohibits government agencies in California from cutting retirement benefits without providing employees with comparable pension compensation.
In its 2016 ruling in the Marin case, the appellate court 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.”
“And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension,” the court wrote. “So long as the Legislature’s modifications do not deprive the employee of a ‘reasonable’ pension, there is no constitutional violation.”
In that case, MAPE filed suit after MCERA responded to passage of the Public Employees’ Pension Reform Act (PEPRA) of 2013 by excluding standby pay, administrative response pay, callback pay and cash payments for waiving health insurance from the calculation of members’ final compensation.
The Supreme Court, however, decided to take up another similar case first. Alameda County Deputy Sheriffs’ Association vs. Alameda County Employees’ Retirement Association dealt with a number of practices used to increase pensionable compensation that were banned by PEPRA. They included termination pay, cash-outs of vacation or sick pay, on-call pay and pension enhancements.
On July 30, the Supreme Court upheld the sections of PEPRA that outlawed these practices, but it did so while upholding the California rule.
Gregg Adam, an attorney who represented co-plaintiffs in the MAPE case and the plaintiffs in another case bearing on the California rule, said there were a number of parallels between the Alameda County case and the Marin case.
Adam said that after the Supreme Court ruled on the Alameda County case, it came as no surprise when it sent the Marin case back to the appellate court.
“It was almost guaranteed,” Adam said. “They basically sent it back to the Court of Appeal to decide what to do in light of the Alameda decision.”
Alexander Volokh, a law professor at Emory University who has been closely monitoring rulings affecting the California rule, said, “There would be no point in reviewing the Marin County case because it is on exactly the same issue: pension spiking.”
Adam said that given the ruling in the Alameda case, “Certainly, standby pay is dead in the water.”
But he said it remains uncertain how the courts will rule on the other issues raised in the Marin case. What does appear certain is that sweeping change in the California rule is unlikely any time soon.
As recently as 2018, there were five cases pending before the Supreme Court with implications for the California rule, including the Marin case.
In March 2019, the Supreme Court ruled on one, Cal Fire Local 2881 vs. California Public Employees’ Retirement System. The court upheld the retirement system’s right to prohibit public employees from adding years of service used for calculating their pensions by paying a one-time fee. Once again, however, the court upheld the California rule.
On Wednesday, the same day the Supreme Court sent the Marin case back to the appellate court, it also rejected three other cases for which critics of the California rule were holding out hope.
“It appears they kicked them all back,” said Timothy Talbot, an attorney representing the plaintiff in one of the cases, Wilmot vs. Contra Costa County Employees’ Retirement Association.
Talbot said the justices sent the Wilmot case and another case his firm was working on, Hipsher vs. Los Angeles County Employees Retirement Association, back to the appeals court to reassess following the Alameda decision.
Talbot said a third case, McGlynn vs. State of California, which involved a group of judges’ pension benefits, was dismissed entirely.
Volokh said the rulings in both the Cal Fire case and the Alameda case strongly affirmed the California rule. He noted that the votes on the two cases were unanimous even though the Supreme Court is made up of almost an equal number of Democratic and Republican appointees
“I think for sure the Supreme Court is not interested in rethinking the California rule in any global way.” he said.
Adam said, “The California rule certainly bent in Alameda but it didn’t break. There is plenty of life left yet in the California rule.”
