PRI Files Amicus Brief in Closely Watched Cal Fire Case

PRI Files Amicus Brief in Closely Watched Cal Fire Case

Click here to download a copy of the brief

SAN FRANCISCO – California-based non-partisan think tank Pacific Research Institute has filed an amicus brief before the California Supreme Court on a closely-watched case that challenges the ability of state and local governments to adjust future pension benefits for current workers.

PRI submitted the amicus because a ruling in this case against the State of California would hinder the Legislature’s ability in the future to exercise its constitutional authority to address the state’s massive unfunded pension liabilities and control the State’s budget.

Cal Fire Local 2881 v. CalPERS and the State of California, challenges a pension reform law proposed by Gov. Jerry Brown’s administration and signed into law in 2012.  The Governor’s plan altered pension formulas for newly-hired state workers and made modest changes to current pensions, such as outlawing the employee’s ability to purchase “airtime.”  Airtime lets government workers buy additional years of service credit for their pensions for years they haven’t worked.

“California has a seriously underfunded pension system that threatens the state’s economy and funding for education, public safety, and other critical programs,” said Wayne Winegarden, PRI’s Senior Fellow in Business and Economics and author of California’s Pension Crowd Out.  “The pension reforms supported by Gov. Brown and the Legislature represent the first steps of what must be done to fix a broken system.  Moreover, the Legislature has the legal authority to enact reasonable reforms that would help mitigate a pension crisis in the state.”

In PRI’s 2016 study California’s Pension Crowd Out, Winegarden found that covering the state’s estimated $170 billion plus pension debt exclusively through tax increases would require an annual $28.3 billion tax increase over 30 years.  Alternatively, keeping taxes stable but cutting total state and local spending across the board by 8 percent would require more than a $5.4 billion cut to schools, a $2.9 billion cut to higher education, and a $1.9 billion cut to California’s hospital systems, compared to current projections.

The union challenging the case argues that the 2012 law violates the so-called “California Rule,” which supposedly requires reductions in pensions to be offset by other comparable pension benefits.  This has made it virtually impossible for state and local governments to modify pension benefits for future services performed by current employees.  In a brief filed in November, the Brown Administration argued that its 2012 law is important because, “at stake was the public’s trust in the government’s prudent use of limited taxpayer funds.”

PRI’s amicus brief addresses the following topics:

  • The magnitude and consequences to California’s residents of its massive unfunded pension liabilities;
  • A way in which California’s judicial opinions addressing the impairment of pension rights, including the so-called California rule, can be harmonized with the fundamental principles underlying the U.S. and California Constitutions’ prohibition against states’ impairment of contract rights; and
  • Specific legal arguments, grounded on fundamental principles of federal and California constitutional law, that demonstrate that the Legislature had the authority to repeal the “airtime” credit program eliminated in the Governor’s pension reform proposal

PRI is represented by Daniel M. Kolkey of Gibson, Dunn, and Crutcher LLP.  Kolkey is also a PRI board member.

To interview Dan Kolkey or Wayne Winegarden, please contact Tim Anaya at (916) 389-9774 or tanaya@pacificresearch.org.

The Pacific Research Institute (www.pacificresearch.org) champions freedom, opportunity, and personal responsibility by advancing free-market policy ideas.  Follow PRI on Facebook, Twitter, and LinkedIn.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.