The California Rule: Why can’t pensions be altered?

Halfway to Concord ^ | 7/9/12 | Bill Gram-Reefer

[SmithL]

In March 2011, the Little Hoover Commission alarmed California’s comfortable labor-dem,ocrat ruling class when it urged state and local governments to roll back benefits for current workers. Inconceivable! cried the public pension industrial complex; “benefits always go up…never down, that is the natural order of things.”

And now comes Amy B. Monahan, a University of Minnesota law professor, who in the Iowa Law Review not only agrees with the Little Hoover Commission, but cites a 1917 California Supreme Court decision about benefits for a police widow. as potential legal wiggle room for pension reform in California.

The Voice of San Diego reports that it all goes back to three words:

At issue in that 1917 decision was the legal status of pensions. Are they bonuses granted to employees after their service to the government? Workers’ property akin to their houses or other possessions? Or part of their employment contracts?

The 1917 decision didn’t make a definitive call. Instead it used the three words, “in a sense,” to link pensions to unbreakable contracts for the first time. In the 95 years since that initial decision, courts in California and other states have expanded on that three-word phrase to the point where we are now with pensions. The article calls the legal principle the “California Rule.”

The article’s author, University of Minnesota law professor Amy B. Monahan, argues the California Rule is off the mark. She contends the state’s court system improperly infringed on legislative power and the pension rule doesn’t fit with both contract and economic theory. Her review of case law found the state Legislature never said pensions were untouchable.

“California courts have put in place a highly restrictive legal rule that binds the legislature without the court ever finding clear and unambiguous evidence of legislative intent to create a contract,” Monahan wrote (emphasis in original).

Monahan says the law should allow governments to make prospective changes to current employee pensions. In other words, she believes California courts should reverse their position and give governments the right to cut pension benefits for the time current employees haven’t yet worked.

This change would give governments the chance to face their existing pension problems head-on by addressing the debt owed to current workers without infringing on employees’ contractual rights. These kinds of pension cuts, she contends, could even benefit workers. In the face of mounting budget pressures, she says, government employees might prefer pension cuts to salary freezes or layoffs.

In short, Monahan concludes making current pensions untouchable is both bad law and bad policy.

[television is just wrong]

let gov moonbeam pay the pensions. he brought in the unions let him finance them.

[Nifster]

and he made sure those contracts were as ridiculous as they are

[piytar]

Something lintards just don’t get: Eventually they really do run out of other people’s money. And then all the court orders and laws in the world don’t mean squat.

[piytar]

Um, libtards...