Pension Crisis

Calif. Court Offers Possibility to Stop Worst Public Pension Abuses

Ruling says state law doesn't have to accommodate spiking.


under water
Rfischia /

Gov. Jerry Brown and the California legislature approved some very modest public employee pension reforms back in 2012. As I wrote about it way back then, the reforms didn't stop the state's massive pension bomb (the unfunded liabilities that come from the state and municipalities pushing pension debts further into the future while still promising employees more and more) from ticking, but it did stop some of the worst abuses of the system and tried to scale back future promises to keep the bomb from growing larger.

One of the practices the pension reforms aimed to stop was "pension spiking," where government employees found ways to take advantage of bonuses and inflate their final salaries unnaturally while approaching retirement to increase the size of their post-retirement pensions. This has help contribute to the thousands of government employees in California receiving six-figure annual pensions.

But the employee unions resisted and have done everything they could to block these reforms from happening. At the heart of the fight is what's referred to simply as the "California rule," a reference to court decisions and interpretations of the state constitution that have made it nearly impossible to reduce anything considered an employee benefit once it has been implemented.

All of that may have changed, if a new ruling handed down this month by a state appellate court for the First District up in San Francisco holds up. In response to a lawsuit by a union representing employees working for Marin County, judges ruled unanimously that pensions are not as set in stone as the unions would like the government to interpret. Yes, the court ruled, the public employees did have a right to pensions, but that right "is only to a reasonable pension—not an immutable entitlement to the most optimal formula of calculating the pension." This means that lawmakers can put rules into place that stop pension spiking.

There's a lot of cheering about the decision by those who understand the massive nature of the state's pension crisis. Mind you, this ruling has to survive a state Supreme Court challenge as well.

And while I don't want to piss all over the corn flakes of pension reformers here (given that I'm one of them, and the Reason Foundation itself is a major pusher of changes), there's still the matter of whether there's political willpower in the state and municipalities across California to actually defuse these pension bombs.

We already have examples where a municipality had been granted the opportunity to pull back on its pension commitments and declined. During Stockton's bankruptcy, the city was given the chance to renegotiate its pension debts just like all other debts and kept things as they were. San Bernardino, currently still trying to negotiate its way out of bankruptcy isn't cutting pensions either (but it did eliminate its entire fire department and contracted out to the county).

Because public employee unions are so powerful and influential in California politics, lawmakers face some potential risks in acting against their interests. And it's not necessarily a partisan problem, though certainly California's Democratic pro-union leadership contributes. For every Democrat supporting the Service Employees International Union, there's a Republican supporting the California Corrections Peace Officers Union (well, maybe it's not a one-to-one comparison given the state's lopsided political affiliation).

But here's something to think about if this court ruling holds up: If it is possible to make "reasonable" changes to pension programs, but lawmakers are afraid of the political consequences of doing so, then there's the ballot initiative system. Pension reformers had introduced an initiative that they intended to get on the fall ballot. They withdrew it earlier this year expecting a very expensive fight in what's looking to be a pretty hot election year.

They plan to reintroduce reforms for the 2018 election. If this court ruling holds up, then that could encourage the costly fight against the unions. We know from research that pension reforms that reduce taxpayer liabilities are very popular with voters. But as long as the state acts as though pensions are sacred cows, even pushing through initiatives might not fix the problems. Letting the cows grasp that the slaughterhouse actually exists might make them a little bit more cooperative.

Read the ruling here.

NEXT: How Process Battles Monkey-Wrench Policy

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  1. Those who rob Peter to pay Paul will always have the unswerving loyalty of Paul.

    1. And I haven’t seen one thin dime!

      1. Don’t lie!

  2. I’d love to get an honest answer from one of these people regarding why they believe they deserve to keep making their final salary for the rest of their lives.

    1. Because it is only fair for them to retire at 55 and live in the same manner they have grown accustomed to…not doing anything very useful and enjoying their leisure. You just weren’t clever enough to get on the gravy train.

    2. Because they gave up *so very much* to work for us, the people, rather than taking a higher salary with some evil corporation (“benefits? What are those?”). Duh.

      1. Because they gave up *so very much* to work for us, the people

        It is funny how many of them say they believe this, and yet if you, as one of “the people”, make a demand upon them, they will gladly remind you that you are not in fact their employer, the government is. The overlap between the people in government who are genuinely helpful and the people who believe they are entitled to cushy benefits for their “public service” is very thin.

    3. They deserve to be rewarded for their “service”!

    4. Easy, because that was the deal that was made between the employer, usually politicians, and the employee, when said employee was hired. That deal is also known as a contract and, unless both sides agree, a contract can’t be changed.
      This case, if it gets past the California Supreme Court will be lost in the U.S. Supreme Court, because Section 10 of the U.S. Constitution, Powers Prohibited of States, makes it unconstitutional for states to “enter into any law”…”impairing the Obligation of Contracts”. This court’s inclusion of “reasonable” just isn’t part of the language of the Constitution.
      The deal/contract can be altered, unilaterally, prior to new employees being hired, because at that point, the deal is being made and the employee can walk away if the terms are not acceptable. Why many of these jurisdictions don’t/haven’t done that, is what taxpayers, who are upset about pensions, should be asking. It would take time, but the pensions will eventually be less. This has been done, and efforts for the new employees to be included in the old deal have, consistently, been rebuffed, and rightly so.
      But to continue to try to alter things, without the approval of the ones, whose benefits are being cut after the contract has been made is the very definition of insanity: trying to do the same thing, again, you have tried to do, unsuccessfully in the past.
      Ask yourself, honestly: would you, willingly allow your contractually assured benefits to be reduced?

  3. See, the constitution is a living, breathing document. I’m all up for rights, but they have to be considered with common sense regulations. We shouldn’t force future generations to interpret it in any particular way, depending on the past.

    But, you know what’s iron clad and beyond interpretation or amendment? Public employee benefit promises. No backsies.

    Can’t have a government changing its mind about promises, now, can we?

    1. It is rather interesting to put those two ideas side by side, isn’t it?

      1. It’s almost as if it’s just a given our money belongs to them, and now we just need to negotiate what rights we get to have left at the voting booth.

  4. Related: John Fund describes the legislative assault on ballot initiatives by way of explaining why Illinois sucks and will continue to suck.

    A major obstacle to ending Chicago’s woes has been a calcified state legislature that consistently rejects every sensible reform proposal. Its chief enforcer is Democrat Michael Madigan, the assembly speaker who has held an iron grip on that post for more than 30 years. He has used his ability to draw legislative maps every ten years to protect incumbents and ensure Democratic control of both houses, to the point that competition for seats has essentially disappeared. This November, 60 percent of legislative seats in Illinois will be uncontested. It was the same story in 2014.

    This travesty of democracy compelled Independent Maps, a bipartisan group of citizens, to propose creating an independent commission to draw legislative maps. Supporters ranged from GOP governor Bruce Rauner and Republican senator Mark Kirk to former Democratic senator Adlai Stevenson III and Bill Daley, the former chief of staff to President Obama. Independent Map’s board included five African-American and three Latino members.

    1. But the four Democratic justices on the Illinois Supreme Court (elected with extensive support from public-employee unions, Speaker Madigan, and the trial lawyers) weren’t impressed. The Democratic majority on the court accepted the argument that the Constitutional provision on initiatives contained all sorts of hidden prohibitions on its use ? their justification for throwing the Independent Maps proposal off the ballot on a four-to-three vote.

      He doesn’t touch on California, but there’s no doubt California deals dirty, too.

      1. Another victory for constitutional republic over direct democracy!

        Sorry, I get salty when I see various ‘citizen initiative’ stories from the US, good or bad. We’re simply not allowed such shit because mob cannot be trusted.

        1. But how is it that the representatives of the republic become such? By “the mob” voting for them.
          What happens when those same representatives get to choose which “mob” they get to have as their selectors? “If I can make it so that my “mob” is overloaded with people, who will vote for me, I can stay here, forever and I can prevent that situation from changing.”
          Kind of distorts the process, doesn’t it?
          At some point, “the mob” must have its say, especially when it is a wide-ranging “mob”, not one carefully chosen to do what is predictable.

      2. California managed to pass its “independent” redistricting initiative but things went badly once political operatives got involved.
        The independent commission came up with its districts but then allowed alterations based on testimony of individuals, who had particular concerns.
        Unfortunately, one side thought that should be honest concerns of citizens, the other side thought it was their opportunity to distort the process, through less-than honest testimony – they even admitted to that, after the fact, claiming to believe the other side would do the same.
        What emerged was a distorted redistricting, leaning towards the party that felt that underhanded dealing was what was expected.
        Can anyone guess which party was the one, who came out ahead?

      1. This is why no outsider can be trusted with partitioning districts: it’s just too complex to be trusted to some inexperienced neophyte.

      2. Jesus Christ!

      3. Those really are hilarious.

      4. KY courts prevented the worst of that by stating that the map must split the minimum amount of counties.

        Within a county, that kind of stuff can still happen and there was no rule on how many times a county could be split. So my county is about the size of two state house districts. City and county would be very near perfect split.

        So what was done? City is one district and county is split into 4 different districts based in surrounding counties.

    2. Counter-example: California.

  5. This is yet another reason I vomit on my shoes every time I hear public employees referred to as public servants, including military, police and fire fighters. Try that one at your local republican meeting.

    1. The public is everyone but any individual person. It is everyone else. So when the cops murder someone or when someone is robbed to pay a pension, that is in fact a public service. Because it serves everyone except the person who is murdered or robbed.

    2. A lot of today’s Republicans are yesterday’s Democrats. While today’s Democrats are fighting over living wages and transgender bathrooms, yesterday’s Democrats are gushing about public service “heroes” and the necessity of government to deliver things like roads and water. They just happen to vote GOP now, at least most of the time. Although there remain “conservative” Democrats in the South, at least. Nixon recognized and capitalized on this shift and Reagan cemented it.

      The Coolidge/Goldwater Republicans are few and far between.

      1. This is not necessarily an insult/compliment/apology for either of the two parties. And it is also somewhat temporal. The Democrats I’m talking about are (the children of) the Wilson/Roosevelt Democrats (although maybe somewhat reformed). Jackson/Cleveland Democrats are a different (almost entirely extinct) animal altogether.

        1. The progressive movement started in the Republican party. The original social justice warriors were disaffected southern evangelicals who believed it was their duty to create heaven on earth in order to herald the Second Coming of Jesus. It just so happens that their theology was a mess and their intentions were self-serving more often than not. Less than a generation later, the progressive movement had been taken over by atheist eugenicists, and the original evangelical strain became the ideological forebearers of the socons of today.

          Never forget that both TEAM RED and TEAM BLUE are branches of the same progressive, social justice tree.

  6. Yes, the court ruled, the public employees did have a right to pensions

    Bzzt. Wrong answer, try again.

    1. A right to something someone in the future hasn’t produced yet.

    2. That’s truer than you know, because this will almost certainly get overturned upon appeal.

      Just like Peruta and Vergara, a judicial victory in California only lasts as long as it takes for the higher court to rule.

  7. Beware 2 Guys From Jersey With Good Intentions

    Release 22lb Lobster “back into the wild”.

    Where it promptly dies. Because it was probably brain-dead after being on ice anyway. Because fucking morons.

    1. sorry = the scientific post mortem

      The director of marine fisheries research at the Center for Coastal Studies says lobsters live in deep, cold water, and the shallows where Big Lobi was released were likely too warm.

      1. and the shallows where Big Lobi was released were likely too warm.

        So the problem was global warming.

        1. warming? no. Lobbyists.

  8. If anybody deserves to be cared for from cradle to grave, it’s prison guards.

  9. All of that may have changed, if a new ruling handed down this month by a state appellate court for the First District up in San Francisco.

    If what?

  10. All of that may have changed, if a new ruling handed down this month by a state appellate court for the First District up in San Francisco.

    If what?

  11. It’s fun watching the California utopian builders try to wiggle their way out of the problems created by their bad ideas.

  12. Call it structuring and let em serve 25 years to life. 2 birds.

  13. Because public employee unions are so powerful and influential in California politics, lawmakers face some potential risks in acting against their interests.

    Those poor poor politicians. It’s so hard doing the right thing.

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