Decision on ‘California rule’ will impact who rules California

SACRAMENTO, CA - JULY 21: A sign stands in front of California Public Employees' Retirement System building July 21, 2009 in Sacramento, California. CalPERS, the state's public employees retirement fund, reported a loss of 23.4%, its largest annual loss. (Photo by Max Whittaker/Getty Images)

On its surface, the case heard last Wednesday by the California Supreme Court in CalFire Local 2881 vs. CalPERS doesn’t seem that important. At issue is the so-called “California Rule,” an obscure legal doctrine relating to public employee pensions. But for California’s beleaguered taxpayers, the case is one of extraordinary importance because its outcome will determine the extent to which the local governments will look to taxpayers to shore up failing pension plans even more than they already do.

Labor interests have argued that under the “California Rule,” no pension benefit provided to public employees by statute can ever be withdrawn without replacement with some “comparable” benefit, even if it’s deferred compensation for services not yet provided, and even if the Legislature determines that citizens who are not public employees are unfairly suffering as a result of prior legislatures’ mistakes.

More than a decade ago, California politicians, seeking to curry favor with public-sector labor, began enacting laws to significantly increase public employee compensation. Among these enhanced benefits were a series of laws which allowed public employees to spike their pensions. For example, a 2004 state law allowed employees with at least five years of service to purchase up to five years of additional credits — commonly labeled “airtime” — before they retire. Under this plan, a 20-year employee could receive a pension based on 25 years of contributions.

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