California Supreme Court

The California Supreme Court will review a case that gave state and local government new authority to reduce public employee pensions.

Maura Dolan
November 22, 2016

The California Supreme Court decided Tuesday to review a ruling that would give state and local governments new authority to cut public employee pensions.

The court, meeting in closed session, unanimously accepted labor unions’ appeal of a decision that said government pensions were not “immutable” and could be trimmed.

But the court will not review further arguments in the case until a court of appeal resolves another pending pension dispute. That could take months.

The case now before the state high court was decided in August by a three-judge panel of the 1st District Court of Appeal in San Francisco.

The other pension case, which raises similar issues, is pending before a different panel of judges in the same court. That panel has not yet scheduled a hearing on it.

The court of appeal’s August ruling amounted to a major change in California pensions law, scholars said.

For decades, California courts have ruled that state and local employees were entitled to the pension that was in place on the day they were hired. Pensions could be cut for current employees only if an equivalent benefit were added, making it difficult for governments to cut costs.

If upheld, the ruling could be a vehicle for reducing a shortfall of hundreds of billions of dollars in public pensions in California. Other states grappling with pension debt also could follow California’s lead.

The court agreed to take the case in a brief order that did not reveal the justices’ thoughts. A decision in the case is likely to be issued in several months.

The ruling stemmed from a pension reform law passed in 2012 by state legislators. The law cut pensions and raised retirement ages for new employees and banned “pension spiking” for existing workers.

Pension spiking has allowed some workers to get larger pensions by inflating their pay during the period in which retirement is based — usually at the end of their careers.

Employees have done this by cashing in years of accumulated vacation or sick pay or volunteering for extra duties just before retirement. The practice in some cases has given employees pensions that exceeded their regular salary.

The Marin County retirement system, relying on the new law, decided that pay for various on-call duties and for waiving health insurance could no longer be counted toward pensions.

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