Court Gets Advice on Pensions

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Finley Peter Dunne, a humorist and newspaper columnist at the turn of the 20th Century famously said in making decisions, “The Supreme Court follows election returns.” The question for California is will the state Supreme Court heed the governor’s advice?

Jerry Brown certainly gave the court advice on how to deal with upcoming public pension cases.

At his recent budget press conference, Brown asserted that there was more flexibility than previously imagined in the so-called “California Rule.” The rule is actually a Supreme Court decision from 1955, which declared that if a benefit to a public employee is reduced it must be made up in another way.

The state Supreme Court will get a chance to explain the parameters of the California Rule when a number of cases scrambling the exact meaning of the rule come before the high court.

In an appellate decision from 2016 on a case generated by public employees in Marin County opposed to legislation Brown signed to limit pensions for new employees, the court made a “reasonable” pension argument declaring that there is no “immutable entitlement” for an “optimal formula” for employee pensions.

Yet, last week, another appellate decision on a challenge brought by public workers in consolidated cases from Alameda, Contra Costa and Merced counties, decided that if pensions are to be reduced there must be “compelling evidence” that the pension reduction does not damage the promise of the retirement system. More on the recent court decision can be found in Ed Mendel’s Calpensions column.

Into the fray steps Jerry Brown only a year away from retirement as governor who wants to leave a strong financial footing for his successor. Brown understands how demands of the pension system with its large unfunded liabilities put pressure on government budgets.

In presenting his latest budget, Brown told reporters “There is a lot more flexibility than is currently assumed by those who discuss the California rule.” Brown expressed a “hunch” that the court would change the California Rule, predicting that in time for the next economic downturn pensions would be on the “chopping block.”

With his “hunch” Brown was sending a message to the court that the pension situation must be modified to meet real world budget demands, not 1955 circumstances.

The justices, of course, are expected to decide the cases according to the law as they interpret it. But, this issue touches the justices in a personal way. If the pension crisis is lessened there will be more money available for the courts, a crying need. Judges also get pensions.

The words of the governor, who has wrestled with the pension issue for some time, will be part of the debate before the court since Brown’s own attorneys replaced the attorney general on one pension case.

Much of the writing on California’s financial health and its governments ignore the darkening shadow created by pension liabilities. Brown who has served both as the town crier of California declaring, “all is well,” but at the same time, the apocalyptic prognosticator of the future who sees “darkness, uncertainty, decline and recession” ahead should be heeded by the court to help mute the dire prediction.

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