PHOENIX - A second state appeals court decision in California that rejects a rigid interpretation of the so-called "California Rule" of vested rights has boosted the hopes of those who want to change public pension formulas in the Golden State.
The California First District Court of Appeal's decision in Cal Fire Local 2881 v. The California Public Employees Retirement System Dec. 30 states that, although an employee has a vested right to a pension, their only right prior to retirement is to a "substantial or reasonable pension," backing up an earlier decision from a different panel of judges in the same court, which ruled in a Marin County case that even current employees are not entitled to "spike" their benefits.
Those rulings are a rejection of the long-held "California Rule," which arose from a 60 year-old State Supreme Court ruling generally interpreted to mean that existing employees' benefits cannot be reduced, even for formulas in future years of employment.
The California Supreme Court has already agreed to hear the Marin County case in the near future, but pension reformers hailed the latest ruling.
"Pension reformers in California have been advocating for years that some reasonable modifications to future pension benefits accrued for future work by current employees could be permissible under the California Constitution," said Retirement Security Initiative board member and former San Jose Mayor Chuck Reed. "It now seems it may be possible to do so."
The RSI is an advocacy organization focused on protecting and ensuring the fairness and sustainability of public sector retirement plans by keeping their costs to governments in check.
The appeals court noted that "California law is quite clear that the Legislature may indeed modify or eliminate vested pension rights in certain cases," the appeals court noted.
"The big question for pension reformers is whether or not the California Supreme Court will agree," said Reed. "The Marin County case has already been accepted by the Supreme Court and this case is likely to go there as well. If the Supreme Court agrees with these appellate court decisions, the legal door will be open for Californians to begin to take reasonable actions to save pension systems and local governments from fiscal disaster," concluded Reed.