Jerry Brown Threatens California Pensions
The state is more than happy to give away other people’s money, but inevitably things fall apart when the state runs out of other people’s money.
Jerry Brown is acknowledging California has just about run out of money:
Gov. Jerry Brown this week predicted that his 2012 pension law will survive union challenges in court and blow a hole in the so-called “California rule” that has restricted changes to public employee retirement plans for half a century.
“When the next recession comes around, the governor will have the option of considering pension cutbacks for the first time in a long time,” Brown said at a news conference this week where he unveiled his 2018-19 budget plan.
Brown has been working to strike out the California rule, a precedent dating back to the 1950s that holds public agencies cannot reduce pension promises without offering workers new incentives to offset the loss of retirement income.
The worst-case scenario for public employees would be a reduction in the rate they accrue their pensions, say advocates who want to limit the state’s pension liabilities. Potential changes would not affect pensions that current retirees already receive, unless a government agency goes bankrupt and stops paying its bills.
On Monday, unions challenging the pension law received a more favorable ruling in a separate case filed by the Alameda County Deputy Sheriffs Association. The state’s 1st District Court of Appeal held that public agencies could modify pension benefits without offering additional compensation – disregarding the California rule – but the court emphasized that changes to pensions must also be reasonable and that agencies must consider the financial burden they’d place on their workers and retirees if they renege on benefits.
Brown’s pension law required public employees hired after Jan. 1, 2013, to contribute more money toward their retirements and capped their benefits by eliminating generous benefits the state gave to public workers during the dot-com boom. Brown’s administration says the law put the state’s two largest public pension systems, the California Public Employees’ Retirement System and the California State Teachers’ Retirement System, on a path to long-term stability.