California politicians, both progressive Democrats, and their GOP sympathizers are unwilling to cut government spending, especially on spending favoring illegal aliens and special interest nonsense such as global climate change and worthless small fishes, and now need more than normal tax revenues can provide to help resolve the State’s rapidly expanding unfunded pension liabilities. Exacerbated by bad investment decisions resulting in major losses in investment revenue.
With the unfunded pension crisis looming over Sacramento, it is only natural that the politicians would seek to eliminate or modify the “California Rule” which generally provides that public pensions cannot be modified. More specifically, “[the] pension offered on the date of hire becomes a ‘vested right,’ protected by contract law, that cannot be cut unless offset by a comparable new benefit, which erases any savings for employers.”
However, subsequent lower court cases challenged the California rule. Specifically positing that “while an employee may acquire a vested contractual right to a pension, his right is not rigidly fixed by the legislation in effect during any particular period in which he serves. ‘The employee does not have a right to any fixed or definite benefits, but only to a substantial or reasonable pension. There is no inconsistency therefore in holding that he has a vested right to a pension but that the amount, terms and conditions of the benefits may be altered.’” And, of course, there is no real definition of what a “substantial or reasonable” pension might be.
Now, the California Supreme Court is about to review at least two cases that deal with the subject matter at hand.
There should be no doubt that the pension system is bloated and was thoroughly corrupted with union-negotiated rules that allowed many retirees to artificially manipulate their future pension payments to outrageous amounts – sometimes far exceeding their normal salary had they remained employed.
Let’s see what Governor Brown is saying in his “intervener” brief …
Twenty years ago, federal tax law began allowing state and local public pensions systems to sell additional, fictional years of retirement service credit to their members. When purchased and added to an employee's years of actual service, this "airtime" artificially increased the number of years used to calculate the employee's pension.
In 2003, the California Legislature enacted legislation granting many public employees in the state the option to purchase airtime. The legislation was premised on the assumption that it would cost public employers nothing-employees electing to participate were supposed to pay both their share and their employers' share of the full present cost of future pension benefit increases.
Over the program's first several years, however, serious flaws emerged. Allowing employees to inflate their pensions with airtime undermined the principle that public pensions rewarded faithful public service and fueled cynicism about public employee
Employees could purchase airtime often as much as 40 percent below the actual cost. That, in tum, increased unfunded liability in the pension system and imposed heavy
These facts came to light in the midst of the worst economic downturn in the state and nation since the Great Depression. That downturn hit California's public pension systems especially hard. For years, self-interested practices, overly generous promises whose true costs were often shrouded by flawed actuarial analyses, and failures of public leadership had caused unsustainable public pension liabilities.
When investment returns abruptly fell off a cliff, unfunded liabilities skyrocketed. Estimates placed unfunded pension liabilities in California in the hundreds of billions of dollars, far exceeding any other state in the nation.
Governor Brown and the Legislature responded to this crisis by enacting the Public Employees' Pension Reform Act of 2013 (PEPRA). PEP RA addressed the problem of unfunded liabilities primarily by reducing the benefits offered to new employees. But it also reformed some laws and practices enjoyed by current employees, including the law offering airtime for sale. Effective January 1, 2013, and after providing eligible employees one final 15-week opportunity to purchase airtime, PEPRA withdrew the
Cal Fire Local 2881 and several of its members (together, the Union) filed this lawsuit, alleging that the legislative repeal of the airtime statute violated the California Constitution's contract clause as applied to any employee hired before January 1, 2013. As both the trial court and Court of Appeal held, that claim lacks merit.
As a threshold matter, the statutory offer to sell airtime did not create a vested contract right. The Legislature is generally free to amend or repeal any law.
A party alleging that the contract clause bars the Legislature from repealing a statute must provide clear and unequivocal evidence to overcome the presumption that the Legislature did not intend to create a vested contractual obligation.
Here, there is no evidence that the Legislature intended to extend an irrevocable offer to purchase airtime and prevent future legislators from adjusting benefits for the fiscal health of the state's pension system.
Unlike the narrow set of laws that have been held to impliedly create pension rights protected by the contract clause, the statutory option to purchase airtime bears no resemblance to deferred compensation earned in exchange for work performed.
The airtime purchase option was therefore not a "pension right," subject to heightened
Furthermore, even if this Court were to assume that the Legislature created a vested right to purchase airtime, the Legislature was free to withdraw it. Withdrawing the offer did not substantially impair employees' right to a substantial or reasonable pension, or their reasonable expectations. And even a law substantially impairing a contract will generally stand if it was reasonable and necessary to serve an important
Ending the costly, imperfect practice of selling additional "service credit" untethered to service was necessary to re-align pension benefits with public service, eliminate a cause of premature retirements, and address a well-established source of unfunded liabilities never intended by the Legislature. And because the mere offer to sell airtime conferred no cash value, withdrawing the offer from employees who never purchased airtime did not materially disadvantage anyone.
This Court should affirm the Court of Appeal's judgment.
Source: In the Supreme Court of the State of California; Cal Fire Local 2881, et al.,
Bottom line …
However, Governor Brown, the progressive socialist democrat, is seeking broad legislative permission to roll-back your pensions. Of course, I strongly suggest that all of the bloated pensions of elected officials be immediately canceled as a penalty for malfeasance in office and they be awards the equivalent amount they would have received under Social Security and that they pay the equivalent of Medicare for their healthcare.
As for all those who artificially inflated their pensions, let them receive a market rate-of-return on invested funds as if they were placed into a high-yield long-term certificate of deposit and their payouts adjusted. Those who used excessive overtime and vacation pay to bloat their pensions, let them receive pay plus a rate of return – and actuarially recalculate their benefits. For those who took early retirement but went on to perform the same job as a consultant, let them access only a limited portion (50%) of their secondary employment. Let us also review disability claims where fraud is said to be rampant. Cancel the pension of any person found to be an illegal alien or who provided materially false identity documents when first employed.
As long as the unions and the special interests own individual politicians, we are totally screwed in this formerly Golden State of California.
"The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane." -- Marcus Aurelius