California Supreme Court Issues Narrow Ruling on Challenge to PEPRA’s Constitutionality
The Court issued a unanimous decision today in Cal Fire Local 2881 v. CalPERS (S239958) avoiding the constitutional question of the extent to which the “California rule” does or does not allow public entities to change and reduce pension accrual rules during the course of a public employee’s career. The specific issue presented was whether or not Governor Edmond G. Brown Jr.’s Public Employees’ Pension Reform Act of 2013 (“PEPRA”) violated public employees’ rights under the state and/or federal Constitutions’ “contract clause” when California closed access to Additional Retirement Service Credit purchases, commonly known as “air time.” 
Judges' Retirement System II (JRSII) does not allow such purchases (and any active JRS I judges have already maxed out their potential pensions by 20+ years of active service) so the case is of purely academic interest to judicial officers. Nevertheless, it had the potential for inviting the state high court to restate or loosen the historic understanding of the “California rule,” a limit on changes to pension plan benefits based on a 1955 decision in Allen v. City of Long Beach , 45 Cal.2d 128, which held that “changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages.”
Since “air time” as authorized by Government Code § 20909 requires the employee purchasing the extra credit to pay for its presumed cost (a bargain for the employee since the plan’s actuarial assumptions were too optimistic and therefore financially unrealistic), the Supreme Court – like the Court of Appeal previously – was able to avoid the constitutional question by simply holding that the withdrawal of the right to purchase air time (after a final grace period when any incumbent employee could exercise the right to do so) was not a “vested right” in the pension plan provided to that employee.
The Court will still have to confront the constitutional question in another pending case Alameda County Deputy Sheriff’s Assoc. v. Alameda County Employees’ Retirement Assoc. (S247095), which challenges whether PEPRA’s limitation on final-year-of-employment “spiking” of compensable pay through abnormal amounts of overtime, surrender of accrued vacation and the like is a violation of the California rule. That case is in the final stages of briefing, but there is no indication as to when it will actually be set for oral argument.
These decisions should have no direct impact on our legislative proposals to reform JRSII, but in the complicated world of Sacramento politics any change in the status quo can create new issues and problems.

Hon. William Highberger (Los Angeles Superior Court)
Chair, Pension Reform Work Group
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