‘California Rule’ Takes Another Hit in the Courts

Pension reform advocates received another boost just before the start of the New Year when a second appeals court panel struck a blow to the so-called ‘California rule.’ In a unanimous decision, the First District Court of Appeal ruled that pensions set at hire can be reduced without offsetting benefits, echoing a previous monumental decision reached in August.

“The law is quite clear that they are entitled only to a ‘reasonable’ pension, not one providing fixed or definite benefits immune from modification or elimination by the governing body,” Justice Martin Jenkins opined. “We agree with this conclusion reached by our colleagues,” he added.

The two rulings represent a major break with the past when numerous court rulings upheld the idea of a vested right to pensions offered at hire. That principle has prevented meaningful overhauls, according to advocates of reform.

The overarching question is still whether or not the California Supreme Court will agree with this increasingly popular interpretation of the law. If it does, public employers will have a powerful weapon to wield against skyrocketing pension costs.

You can read about the case that prompted the latest ruling here.