Court date set for California Rule pension arguments

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The California Supreme Court will hear oral arguments in the first of five pension cases that may challenge a series of rulings protecting pensions in the state.

The high court announced Thursday that it would hear arguments Dec. 5 in Los Angeles in CalFire Local 2881, et al. v. CalPERS, et al., the first of the five pending vested rights cases before it.

The CalFire case challenges the constitutionality of the Public Employees’ Pension Reform Act of 2013 that applies to legacy as well as new members of all public retirement systems in California that are subject to its mandates, Nossaman LLP partner Ashley Dunning wrote in a 2017 e-alert.

Gov. Jerry Brown has been urging the court to act before his time as governor draws to an end. Successor Gavin Newsom was elected Tuesday and will replace the termed-out Brown in January.

Brown worked with the Legislature in 2013 to enact PEPRA to lighten some public pension costs, which are challenging state and particularly local budgets.

Brown wants to modify so-called California Rule precedents, which prevent cities and other public agencies from making even minor adjustments to pension benefits, even for future years of an employee's career.

"Vital city services are at risk, including the ability to fund police and fire protection," the League of California Cities wrote in a brief supporting Brown.

Public employees and state and local governments have been waiting anxiously all year for the court to put oral arguments on its calendar.

The California Business Roundtable, an organization that represents the senior leaders of the state's largest employers, filed an amicus brief with the Supreme Court in February in the CalFire case urging the court to reject the California Rule.

“The California Rule has delivered a strong one-two punch: first, it caused state and local governments to be blindsided by unexpected pension obligations, and second, it robbed them of the only tools they had to deal with the problem,” argued Karen Hewitt, a Jones Day partner, in the brief. “As long as the California rule exists, the pension crisis cannot be solved.”

The First District Court of Appeal issued a unanimous published decision on December 30, 2016 in the Cal FIRE case “upholding the constitutionality of Legislature’s Public Employees’ Pension Reform Act of 2013 that applies to legacy as well as new members of all public retirement systems in California that are subject to its mandates,” Nossaman LLP partner Ashley Dunning wrote in her 2017 e-alert on the case.

The court held that the Legislature did not violate the vested constitutionality rights of public retirement system members when it prohibited, on and after Jan. 1, 2013, the continuation of programs that had permitted retirement system members who had earned at least five years of retirement service credit to purchase another up to five years of “nonqualified retirement service credit” sometimes referred to as “airtime credit.”

The appeals court in CalFire “determined that by providing the option to purchase service credit provision to CalPERS members, the Legislature had not promised retirement system members to “not modify or eliminate the option to purchase service credit, particularly in light of the legal presumption against the creation of a vested contractual right,” Dunning wrote.

The arguments will be viewable through the Supreme Court’s website.

A decision in the case would be rendered within 90 days of the completion of oral arguments, according to an e-alert from Nossaman LLP.

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