PHOENIX - The Supreme Court of California has agreed to hear an appeal of a landmark pension ruling that analysts and reformers had hailed as a positive for the state and local governments.
The state's top court is expected to rule in the next few weeks on an effort to overturn an August appellate court's decision that the Marin County Employees' Retirement Association was free to reduce unearned benefits for current employees. That ruling represented a less rigid interpretation of the so-called "California Rule," which arose from a 1955 California Supreme Court decision that the state constitution grants employees the right to continue earning pension benefits at least as good as those offered when they were hired.
The appellate decision that had given many pension reformers hope and led analysts to cautiously conclude that it could be a credit positive for both the state and its localities. Moody's Investors Service said at the time that "by allowing prospective changes to at least one component of current employees' pension benefit formulas to stand, the Court of Appeal's ruling signals a potentially material increase in legal flexibility related to public pensions in California."
Former San Jose Mayor Chuck Reed, a pension reform crusader and board member of the pension advocacy group Retirement Security Initiative, also hailed that decision and immediately noted that the California Supreme Court would have a high-stakes decision to make.
"The big question for pension reformers is whether or not the California Supreme Court will agree," said Reed. "If it does, the legal door will be open for Californians to begin to take reasonable actions to save pension systems and local governments from fiscal disaster."
A date for arguments has not been set.
David Crane, a lecturer in public policy at Stanford University and president of the legislative advocacy group Govern For California, wrote online that the MCERA case is potentially good news for California citizens who will ultimately bear the cost if pension deficits aren't brought under control. Crane also pointed out that state judges, including those in the Supreme Court, are actually entitled to pension benefits and are essentially ruling against their own personal interests if they uphold the MCERA decision.
"The MCERA decisions demonstrate courage by California state judges because they are entitled to pensions under the California law about which they ruled," wrote Crane. "Now the question is whether the California Supreme Court — public employees entitled to pensions under California law — will be equally courageous."