California Supreme Court Set For Ruling That Could Cut Pensions For Public Workers, by Tyler Durden

If bloated public pensions are to be reduced, lawmakers are going to have to go to court and get legal precedents and supposed state constitution guarantees that have been held not to permit reductions and changes for existing state and local employees overturned. From Tyler Durden at zerohedge.com:

For decades now public pensions have been guided by one universal rule which stipulates that current public employees can not be ‘financially injured’ by having their future benefits reduced.  On the other hand, that ‘universal rule’ also necessarily stipulates that taxpayers can be absolutely steamrolled by whatever tax hikes are necessary to fulfill the bloated pension benefits that unions promise themselves.

Alas, that one ‘universal rule’ may finally be at risk as the California Supreme Court is currently considering a case which could determine whether taxpayers have an unlimited obligation to simply fork over whatever pension benefits are demanded of them or whether there is some “reasonableness” test that must be applied.  Here’s more from VC Star:

At issue is the “California Rule,” which dates to court rulings beginning in 1947. It says workers enter a contract with their employer on their first day of work, entitling them to retirement benefits that can never be diminished unless replaced with similar benefits.

It’s widely accepted that retirement benefits linked to work already performed cannot be touched. But the California Rule is controversial because it prohibits even prospective changes for work the employee has not yet done.

The ballooning expenses are an issue that Gov. Jerry Brown will face in his final year in office despite his earlier efforts to reform the state’s pension systems and pay down massive unfunded liabilities.

His office has taken the unusual step of arguing one case itself, pushing aside Attorney General Xavier Becerra and making a forceful pitch for the Legislature’s right to limit benefits.

“Lots of people in the pension community are paying attention to these cases and are really interested in what the California Supreme Court is going to do here,” said Amy Monahan, a University of Minnesota professor who studies pension law.

“For years, self-interested parties, overly generous promises whose true costs were often shrouded by flawed actuarial analyses, and failures of public leadership had caused unsustainable public pension liabilities,” his office wrote. A ruling is expected before Brown leaves office in January 2019.

Meanwhile, it’s not just California taxpayers that have an interest in the Supreme Court’s decision as twelve other states also observe a variation of the ‘California Rule’, said Greg Mennis, director of the Public Sector Retirement Systems project at Pew Charitable Trusts. One of them, Colorado, has walked it back a bit, he said, requiring “clear and unmistakable intent to form a contract before pensions will be contractually protected.”

To continue reading: California Supreme Court Set For Ruling That Could Cut Pensions For Public Workers

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