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Governor Brown Opines on Why Supreme Court May Modify “The California Rule”

January 11, 2018
In his final budget presentation, Gov. Jerry Brown specifically addressed questions by reporters pertaining to the California Rule — the judicial precedent established in 1955 that has hampered the state and local governments’ ability to make any prospective modifications to public employee pension formulas. 
This “rule” is often cited as a limitation on state and local agency efforts to modify public pension programs in an effort to reduce their cost. 
However, several cases are making their way through the judicial process including one specific to the ability to purchase years of service credit or “airtime” that is currently pending before the California Supreme Court.
When asked to share his opinion about why he believes the California Supreme Court will provide more flexibility under the California Rule, the Governor, in part stated, “There have been several lower court opinions with judges both liberal and conservative who have taken the position that employees are entitled to a reasonable pension but not entitled to any numeration that they can imagine”.
He goes on to say, “Like many things in law the so-called California Rule is not as clear as you might think … I think where that’s going to lead when the Supreme Court looks at it [the pending case], will be greater flexibility …” 
This is not the first time the Governor has made a strong case for more flexibility. In November, he departed from tradition by supplanting the Attorney General’s office, submitting a brief specific to the case currently pending before the California Supreme Court. In the brief he states, “Employers and taxpayers should not bear the burden of guaranteeing the additional employee investment risk that comes with airtime purchases.”
Earning praise from various editorial boards, the Governor contends that an agency must be able to make modifications to current formulas to ensure the fiscal solvency of public agencies as well as the sustainability of the retirement system.
The full clip of Governor Brown’s comments regarding the California Rule is available to watch online.
As Governor Brown embarks on his final year in office, public retirement security and system sustainability will remain a hot topic in Sacramento. Defined benefit pension plans play a vital role in attracting and retaining quality public employees. Many cities, however, face increasing challenges funding these benefits while maintaining levels of public services their residents expect.
Employer contribution rates have increased dramatically in recent years and will continue to do so for years to come. In 2012, the Legislature adopted more reasonable and sustainable benefit tiers for new employees. However, it will take decades for those cost savings to be realized.
The League is committed to work with all stakeholders to address these challenges head-on in order for local agencies to continue to provide quality services while retaining their valued employees. For more information on retirement system sustainability, please visit www.cacities.org/pensions.

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