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Blue Model Blues
California Supreme Court Justices Could Make or Break Pension Reform

From its New Deal-era founding through the 1990s, California’s public pension system, Calpers, was well-managed and fiscally sound, helping to provide a secure retirement for the state’s high quality civil service corps. But for the past generation, the fund’s position has steadily deteriorated, thanks to dishonest accounting, politicized investment ventures, and union capture of the state legislature. Today, California’s public pensions face a shortfall in excess of a trillion dollars.

A state appeals court gave some hope to California taxpayers earlier this year when it upheld a 2012 pension reform law which authorized local governments to crack down on “pension spiking,” by which public employees manipulated the rules to receive higher-than-anticipated lifetime benefits upon retiring. That ruling has been appealed, and now the seven justices on the California State Supreme Court have the power to either pave the way for a rationalization of the decrepit system or else deal a major setback to the reform effort. The Los Angeles Times reports:

The court, meeting in closed session, unanimously accepted labor unions’ appeal of a decision that said government pensions were not “immutable” and could be trimmed. […]

For decades, California courts have ruled that state and local employees were entitled to the pension that was in place on the day they were hired. Pensions could be cut for current employees only if an equivalent benefit were added, making it difficult for governments to cut costs.

If upheld, the ruling could be a vehicle for reducing a shortfall of hundreds of billions of dollars in public pensions in California. Other states grappling with pension debt also could follow California’s lead.

Courts across the country have interpreted their state constitutions to be highly protective of public sector pensions, even as unions and legislatures mismanage them, so it’s anyone guess how the California justices will rule. But the outcome of the case will reverberate far and wide. The Golden State has already faced two pension-fueled bankruptcies, in Stockton and San Bernardino, with more sure to come if public employee retirement benefits continue to spiral out of control. And a Republican-controlled federal government is unlikely to look kindly on pleas for assistance from a fiscally irresponsible deep-blue state.

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  • JR

    California Republic!!!! #CalExit

  • Andrew Allison

    Anybody’s guess? Surely you jest! As you write, the Supreme Court of the Socialist Republic of California voted unanimously to accept the appeal.

    • f1b0nacc1

      Hope you had a delightful Thanksgiving. An old buddy of mine who is doing a stint at the DLI shared the holiday with us, and I thought of you…

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      • Andrew Allison

        Thank you, and the same to you and yours. My (Linguistics Ph.D) Russian Bride worked at DLI until I managed to her into quiting. The civilian administration there combines all the worst features of the civil service and the army (SNAFU+FUBAR)!

        • f1b0nacc1

          My wife’s specialty was comparative literature (Russian and Italian fairy tales, and modern folklore…go figure)…

          And yes, the DLI is a very strange place….

          • Andrew Allison

            What’s strangest of all is that, according to my wife, despite its appalling management it delivers the most effective language teaching she knows of. This may, of course, have something to do with a student body which is largely both hand-picked for latent language skills and very disciplined.

          • f1b0nacc1

            That is my understanding as well, but of course I know of them only by indirect interaction….

  • CaliforniaStark

    The California Supreme Court can decide to hear an appeal from an appellate case: “When necessary to secure uniformity of decision or to settle an important question of law.” Given the subject matter and the policy implications, would have been surprised if the Supreme Court had not agreed to hear the appeal. Know of a recent high profile case the California Supreme Court agree to hear the appeal, and upheld the appellate court decision.

    Hopefully the justices will realize this will likely be the most important case they ever decide.

    • JR

      Either California Supreme Court recognizes the arithmetic or it doesn’t. In the long run, the ruling is irrelevant. Arithmetic wins. Arithmetic always wins. If you are a CA resident, get ready to be totally hosed, even more so than you are now.

      • CaliforniaStark

        Unfortunately, even if the Supreme Court upholds the appellate decision (and possibly the second one pending as well), it will not have a major impact on California’s pension problems. What is at issue is only the method of calculating income that is used to determine the amount of the pensions. The laws the unions are challenging were actually passed by the liberal Democratic state legislature — the employee unions are challenging it because they don’t want any of their existing pensions and perks taken away. The California state pensions system will still be crisis regardless of how the California Supreme Court decides.

        Of course, when California breaks away as a progressive, independent republic, the solution to its pension woes will be simple. Just expropriate some of the assets of Apple, Google, Facebook and other tech companies. Problem solved. Am so looking forward to being North America’s Venezuela.

  • Tom_Holsinger

    We can trust the California Supreme Court to soak the taxpayers.

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