PD Editorial: California’s top court gets second chance on pensions

California's top court has a timely second opportunity to create an off-ramp from the state's pension crisis.

The state Supreme Court is scheduled to hear oral arguments Tuesday in a challenge to a 2012 state law that curbed a practice known as pension spiking, which in some instances allowed employees to collect considerably more pay in retirement than they received while they were on the job.

For public employees, retirement benefits are typically based on three factors: age, years of experience and pay.

Over the years, some employees were allowed to add bonuses, cash out leave time or use other mechanisms to boost their final salaries and, in turn, their pensions.

Sonoma County produced two high-profile examples: former Sheriff Bill Cogbill, who stepped down in 2011 with a $231,000 salary and collects a $239,000 a year pension, and former county Auditor-Controller Rod Dole, who also retired in 2011 with a $221,000 salary and collects a $254,000 a year pension.

The case in front of the state Supreme Court was brought on behalf of sheriff's deputies in Alameda County and seeks to restore pension spiking rights for public employees hired before the reform law took effect in 2013.

Calculating pensions from padded final paychecks is a dubious practice, and the court shouldn't stand for it.

This case also case gives the justices an opportunity to make an even more meaningful statement about retirement benefits for state and local employees.

To justify their challenge, the Alameda County deputies rely on a legal doctrine called the “California rule.” The rule - it's really more of an interpretation - says retirement formulas for public employees can never be reduced, no matter the cost to taxpayers.

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

In a ruling on a separate challenge to the 2012 pension law, a state appellate court concluded that public employees are entitled to a “reasonable” pension but “not an immutable entitlement to the most optimal formula of calculating the pension.” In effect, the court determined that retirement formulas, like salaries and other benefits, are subject to change.

When that case reached the state Supreme Court last year, the justices upheld the pension law, but they ducked the California rule question.

It's in front of them again in the Alameda County case.

If the court upholds the employees' interpretation of the rule, cities, counties and other public employers will not be able to reduce their unfunded liabilities and curb soaring pension costs by negotiating reductions in future benefits for active employees. Their remaining options would be cutting services or raising taxes - and neither choice would be popular.

The court could - and we hope it will - use this case to clarify that the California rule doesn't prevent public employers from seeking reductions in not-yet-accrued benefits at the bargaining table.

State attorneys contend in court papers that spiking was never legally authorized, an argument the court could use to outlaw pension spiking while once again failing to address the California rule. A permanent ban on spiking would be welcome, but the Supreme Court can't duck the California rule forever.

(You can watch the oral arguments at courts.ca.gov. The case is one of three on the court's 9 a.m. calendar.)

You can send a letter to the editor at letters@pressdemocrat.com.