PD Editorial: A supreme chance to control pension costs

We've said it before: The biggest obstacle to any meaningful resolution to the state's pension crisis is the “California rule.”

The rule - it's really more of an interpretation - is the foundation for claims that retirement benefits for government employees cannot be reduced under any circumstances, even when those benefits threaten the solvency of public agencies.

By this reasoning, even benefits not yet accrued are sacrosanct.

The issue finally made it to the state Supreme Court this month in a case that could restore some needed balance between public services and pension benefits.

At issue is “airtime,” employee purchase of retirement credit for time not worked.

You read that right, credit for time not worked.

Airtime was eliminated in a modest pension reform law passed by state legislators and signed by Gov. Jerry Brown in 2012. The same law did away with several other methods of pension spiking, and it reduced pension benefits and raised the retirement age for state and local government employees hired after Dec. 31, 2012.

The airtime provision was retroactive, applying to employees on the job before the 2012 reforms.

Cal Fire Local 2881 sued, contending that the elimination of airtime is unconstitutional - a violation of the California rule.

The airtime benefit, created in 2003 and utilized by more than 61,000 public employees before it was canceled, wasn't supposed to cost taxpayers a dime. Of course, the retroactive pension increases rolled out in the early 2000s were supposed to pay for themselves, too. And we know how that turned out.

Investment returns didn't cover the cost of bigger pensions or airtime - and, by law, the taxpayers get stuck with 100 percent of the shortfall, which is a big reason why pension costs increasingly are squeezing out other public services.

In the case of airtime, a California Public Employees Retirement System study found that employees paid 72 to 89 cents for every dollar's worth of added benefits, a fact cited by an Alameda County judge who ruled against the union.

The judge's decision was unanimously upheld by a state Court of Appeal panel, and we trust that the state Supreme Court, which heard oral arguments on Dec. 5, will reach the same conclusion.

But we hope the justices don't duck the bigger issue by limiting their decision to the elimination of airtime. In ruling on challenges to the 2012 law, two state appellate courts have held that public employees are entitled to a “reasonable” pension, but they aren't immune from modifications required to maintain the integrity of the retirement system.

That's a lot less sweeping than the so-called California rule.

Affirmation from the state Supreme Court would allow cities, counties, school districts and other public employers to negotiate changes to, at least, slow the crushing growth of retirement costs.

To be clear, pension benefits for retired public employees aren't at stake. Neither are benefits already earned by public employees.

But by siding with the lower courts, the justices would affirm that public employers have leeway to adjust unaccrued benefits through collective bargaining or, in extreme cases, legislation. That would be a game-changer, because controlling unsustainable costs is not only necessary to maintain public services, it's the key to keeping pension promises.

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