California’s Supreme Court takes cautious steps on public employee pensions

Faced with rising obligations to current and retired public employees, the state of California and many local governments are pouring an increasing share of their tax dollars into pensions. Yet they still face a mountain of unfunded liabilities. The pension systems estimate that they are underfunded by $331 billion, according to the California Pension Tracker project at Stanford University, while many argue that the amount is several times higher.

The enormous shortfall helped persuade the state Legislature to pass public employee pension reform legislation proposed by Gov. Jerry Brown in 2012, reducing benefits for workers hired in the subsequent years and eliminating some of the tools current employees had used to pad their pension checks. Public employee unions quickly sued, accusing the Legislature of reducing benefits that should have been sacrosanct under longstanding state court precedents. Those precedents — collectively known as the California Rule — have essentially barred governments from cutting their current or former workers’ pension benefits for any reason.

Several of the union lawsuits have been working their way up to the state Supreme Court, which delivered its ruling on the first of them Monday. Although the decision was modest and narrow, it struck the right balance between the interests of taxpayers, governments and public employees. Click here to read more: