California’s pension program for police, teachers, and other public sector employees could be in serious trouble depending on the outcome of a current court battle. It could be a big win for the millionaires and billionaires who have been spending a fortune for years trying to reduce and even eliminate pensions for the people that work in California schools, law enforcement agencies, hospitals, public works etc.and are entitled to their pensions by the laws governing the contracts that were signed.
According to the LA Times, that unanimous ruling, now before the California Supreme Court, could be a vehicle for reducing a shortfall amounting to hundreds of billions of dollars in state and local pension systems. If upheld, the decision could lead to the kinds of cutbacks previous courts blocked.
Emory University Law Professor Alexander Volokh called the decision “a big change from what the doctrine has been so far” and expressed doubt that it would be upheld. University of Minnesota Law Professor Amy B. Monahan described the ruling as “novel” and the outcome “hard to predict.”
The decision has attracted national attention because of California’s influential role in pension law. Like California, other states are facing massive shortfalls in public pensions and wrangling with ways to head off staggering debts.
Standing in the way have been decades of court decisions that created what is called the “California Rule.” It guarantees government workers the pension that was in place on the day they were hired.
The formula for calculating retirement income generally can be changed only if it is neutral or advantageous to the employee, courts have ruled. It cannot be reduced, except for new hires.
“It is a rule that makes it extremely difficult for states to reform their pensions,” Volokh said, “and lots of states have really big pension problems now.”
Until the last century, the law generally treated government pensions as gifts that could be taken away. People didn’t live long, and pensions were not considered particularly important.
That changed as lifespans rose and government employees sued to protect their retirement earnings. California law now treats government pensions as contracts protected by the state Constitution.
Twelve other states eventually adopted the California Rule, although not all interpret it so strictly. Now that public pension systems are facing massive debts, many states are again looking to California for possible answers.
READ MORE on spiking, pensions, unions who sued.