Northern California Record

Friday, April 3, 2020

California Supreme Court ruling in public employee pension case seeks to clarify "reasonable" pension

By Karen Kidd | Nov 27, 2016

Law money 08

SACRAMENTO – A possible California Supreme Court ruling in a public employee pension case could clarify what a so-called "reasonable" pension for a state worker would be.

That clarification could be very important, given the most recent federal election results and California's huge public employee pension liability, said Jon Coupal, attorney and the president of the Howard Jarvis Taxpayers Association.

"I don't see Congress, going forward, being very sympathetic to California at all," Coupal told the Northern California Record. "So the question becomes, where will California get the money to pay for this?"

Public employee pensions are not the only cost on California's spending list. The state also is trying to fund development of a high-speed rail project, as well as other transportation improvements. However, California's congressional delegation is made up largely of Democrats, which will continue to be the minority party in Washington.

"Whether you like it or not, the Republicans are in control in Washington, D.C.," Coupal said. "California can expect to receive very little in the way of federal funding or bailouts."

With federal funding for capital improvements in limbo, the state's public employee pension obligation looms even darker over the state. Public pension debt for the 50 U.S. states and the District of Columbia increased 84 percent, from $2.625 trillion in 2008 to $4.833 trillion in 2014, according to the latest data from by the Stanford Institute for Economic Policy Research. The market liability for California, according to the report, is more than $1.7 trillion, which amounts to $25,325 for per person in the state.

"That debt has to be paid," Coupal said. "It's going to have to be paid by us and by our children and their children."

It's likely the three-member panel of the state's First District Court of Appeal, Division Two, were aware of that multi-generational debt load when they handed down a ruling in a Marin County pension case August, Coupal said.

"I suppose it possibly was in the backs of their minds," he said.

The court of appeal declared in its ruling that public retirement plans to be not immutable, that they can be reduced, and that all public employees can expect is a “reasonable” pension.

The unanimous ruling in the case, Marin Association of Public Employees v. Marin County Employees’ Retirement Association, addresses was is general known at the “California Rule,” a set of regulations and court rulings that guarantees government workers the pension in place on the day they were hired. The formula that calculates retirement income generally can be changed only if it’s in the employee's favor and cannot be reduced, except for new hire, California courts have ruled.

The state's peculiar pension rule also has led to cases of "pension spiking," in which a public employee's pay is increased in various ways toward the end of their service to increase the pension they will receive. That has helped contribute to the state's large employee pension obligation.

The appeal court's ruling that the state could reverse those spikes, leaving retiring public employees with a reasonable pension, is well within the court's authority, Coupal said.

"It is not inappropriate for a court to step in and say, 'We're going to give you a pension that a jury would support and would be reasonable for you to receive for your service in the public sector,'" he said.

The Marin Association of Public Employees didn't agree with the ruling and in September appealed to the California Supreme Court. The high court has not yet announced whether it will hear the case.

Coupal said he has no notion how the state high court would rule in the case, if they decide to hear it, but that there likely would be ramifications either way.

"If they reject the appeal court's ruling, then I think that will throw California in a great deal of disarray," Coupal said.

However, if the California Supreme Court were to affirm the appeals court's ruling, the justices also could define parts of the appellate ruling that currently are very vague, Coupal said.

"It may be that the Supreme Court might consider this case as a vehicle to define with clarity what is meant by a reasonable pension," he said. "We'll just have to see how it shakes out."

The Marin County case won't be the last, regardless of what the state Supreme Court does in that case, Coupal said.

"I think there's going to be more litigation, no matter what happens," he said.

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