Public employees in California may have their pension benefits slashed due to the rollback of a longstanding rule in the state, Gov. Jerry Brown revealed in a recent budget briefing.
The California governor revealed that he has a “hunch” legal proceedings could pave the way for cuts to public employees’ benefits.
“There is more flexibility than there is currently assumed by those who discuss the California rule,” Brown said during the briefing.
The “California rule,” which has been adopted by at least 12 states, protects public employees benefits from rollbacks.
He added that the state’s next governor “will have the option of considering pension cutbacks for the first time.”
As noted by Bloomberg, the California Public Employees’ Retirement System is the nation’s largest public pension, needing 68 percent of assets to cover its liabilities.
Municipal officials have reportedly raised taxes and taken from the state’s reserves in an attempt to cover the cost believing that they weren’t able to tap in to public employee’s benefits.
However, with state and local governments across the country having a $1.7 trillion benefit deficit, the public employee pension is no longer sacrosanct.
While running for re-election in 2014, Brown was asked by host Scott Pelley how he would handle the $300 billion pension deficit that existed at the time.
“Our pension funds have done quite well,” Brown said. “We’ll chip away at it.”
In an almost predictive fashion, the California governor added that the state would do whatever it takes to eat away at the deficit.
“There’s always something,” he stated. “As a matter of fact, if our pensions were not challenging and we didn’t have all these other problems I would have a hard time finding a reason to run.”
That “something” Brown was referring to has now revealed itself to potentially be the retirement benefits of public employees from The Golden State.
In January 2017, the Orange County Register reported that a California appellate court found that employees’ pensions could, in fact, be reduced.
CalPERS, a union that represents the state’s firefighters, challenged California’s Public Employees’ Pension Reform Act of 2013 after it axed “air time” purchases.
The Renne Sloan Holtzman Sakai Public Law Group states that “eligible public employees had the option to purchase at cost up to five years of service credit. Purchase of this service credit, called ‘air time,’ enabled employees to increase their pensions.”
However, California legislature opted to eliminate the service credit program in an attempt to curb pension “spiking.”
“While plaintiffs may believe they have been disadvantaged by these amendments, the law is quite clear that they are entitled only to a ‘reasonable’ pension, not one providing fixed or definite benefits immune from modification or elimination by the governing body,” the Third Division of the First District Court of Appeals panel held.
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