Long settled California law
stretching back 60 years requires that public employees must receive the pension formula offered to them at the beginning of employment for their entire career. Change to the formula is only allowed if a benefit of equal or greater value is offered. Every public official in California who offered pension benefits to employees was aware of this law when they offered new employees a pension. However, public officials who would rather not pay for this benefit--
which now includes Governor Jerry Brown
--are asking the California Supreme Court to reverse this long standing rule in a case about which we have
Pension funds are funded by two sources of income--contributions from employers/employees and investment income. When either is lowered, the other must increase. In the years following the 2007-2008 stock market crash public pensions begin lowering their forecasted investment income returns, leading to increased contributions requirements.
In response to these increased contributions, public pension opponents have invented the euphemism that the pension payments are "crowding out" public services. In other words, although they have made a pension promise which requires payment, they would rather spend the money on other things. And, rather than increase sources of revenues to pay for the promised benefit, they instead want to put the economic burden on their employees by reducing the pension benefit promised. Governor Brown has now joined this parade, casting his position as enabling a "prudent use of limited taxpayer funds."
We have written
about what follows when governments in California have decided to walk away from their pension promise. Active duty law enforcement officers leave in droves and public safety suffers. Unfortunately, in some cases such as Chicago, retirees are left holding the bag when a mayor decides that he would rather
leave retirees and widows of slain officers who do not qualify for Medicare without any health care
so he can
lavish billions of taxpayer dollars to try to lure companies
or the Olympic Games to his city. (Never mind that
these incentives are of little benefit to taxpayers and actually depress economic growth).
ALADS is proud to be part of
Protect Retirement Security for Californians
which will be filing an amicus brief opposing the governor and others who want the Supreme Court to reverse the law so they can walk away from pension promises. We will keep you updated on the progress of this important case.