California

What does the California Supreme Court pension ruling mean for you?

What this labor leader says about court decision allowing cuts to state worker retirement perks

Ted Toppin, chairman of Californians for Retirement Security, reacts to a California Supreme Court ruling allowing cuts to retirement perks for state employees on Monday, March 4, 2019.
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Ted Toppin, chairman of Californians for Retirement Security, reacts to a California Supreme Court ruling allowing cuts to retirement perks for state employees on Monday, March 4, 2019.

The California Supreme Court issued a major decision on public employee compensation Monday, upholding a piece of a 2012 pension law that reduced some benefits for workers.

Below, find a quick guide to questions you might have about the ruling.

How does this affect public workers?

Nothing changes right now for public workers.

Former Gov. Jerry Brown’s 2012 law among other things eliminated a benefit known as “air time” that allowed public employees to buy up to five years of service credit that would boost their pensions as if they had worked that time. Had the court ruled differently Monday, employees hired before Jan. 1, 2013, might have regained access to that perk.

On the other hand, the court could have made it easier for local governments to reduce public workers’ benefits, but it didn’t. The court’s decision preserves the status quo. Government agencies still can’t tinker with their employees’ “core” pension rights unless unions make concessions at the bargaining table.

CalPERS CEO Marcie Frost put it clearly in an emailed statement:

“Today’s decision does not change how we administer benefits on behalf of our 1.9 million members and the nearly 3,000 public agencies that contract with us,” Frost said in the statement. “CalPERS has not offered air time since the Public Employees’ Pension Reform Act took effect in January 2013. Our mission remains what it has always been: to protect defined benefit plans and provide retirement security to California’s public employees, their beneficiaries, and retirees.”

How does this affect taxpayers and local governments?

Air time was not supposed to cost local governments anything, since employees were paying for it. But projections used to determine how much employees had to pay for the benefit turned out to underestimate its cost.

Employee contributions fell short of costs by 12 to 38 percent, according to a CalPERS analysis, leaving governments to make up the difference.

When local governments pay more for worker benefits, they have less money to spend on other public services such as parks or road maintenance. The Supreme Court’s decision protects local governments from having to pay for the air time benefit.

Some well-known advocates for reductions in pension benefits said the ruling keeps open the door to future changes.

“This ruling offers hope that California can take reasonable steps to ensure that our pension systems can always pay all the benefits our employees have earned without driving cities, counties, and school districts into insolvency,” said Chuck Reed, a former San Jose mayor and founder of Retirement Security Initiative.

How does this affect retirees?

It doesn’t. Debates about the California Rule are focused on future benefits for current public workers.

What happens next?

The court’s decision was significant because unions and government agencies in briefs leading up to the case argued it was a test of the California Rule, the set of legal precedents that has prevented public worker benefits from being reduced without compensating them for lost income. The court declined to take up California Rule questions in its decision, determining air time wasn’t a “core” pension benefit with constitutional protections. But those questions remain, and the court could take them up in other cases.

Attorneys who have filed legal briefs in an Alameda County pensions case are waiting for the court to schedule oral hearings. That case is expected to address pension benefits more squarely, since it has to do with whether compensation from things like unused vacation time and sick leave can count in pension calculations.

The ruling has no immediate effect on public workers, but could impact future negotiations over public pension benefits.

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Wes Venteicher anchors The Bee’s popular State Worker coverage in the newspaper’s Capitol Bureau. He covers taxes, pensions, unions, state spending and California government. A Montana native, he reported on health care and politics in Chicago and Pittsburgh before joining The Bee in 2018.
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