Supreme Court: Not Yet Time To Examine "California Rule" On Pensions

Cal Fire Local 2881 et al. v. California Public Employees’ Retirement System et al. (State of California) (2019) Case No. S239958 (Issued on 3/4/19)

Today the California Supreme Court issued its long-awaited decision in the Cal Fire case. The issue was whether PEPRA unlawfully eliminated the opportunity for employees to purchase “air time” service credit. The Court held that because the Legislature did not intend to create a contractual right to the purchase of air time, there was no contractual impairment when that option was eliminated. Further, the Court held that air time was not a core pension right because it was not granted as deferred compensation for work performed.

However, all eyes were on this case to see whether the Court would take the opportunity to address the “California Rule” on pensions. The Court declined the invitation:

The state and many amici curiae have urged us to use this decision as an occasion to re-examine the California Rule, the doctrine developed in our prior decisions defining the scope of constitutional protection afforded pension rights. … Underlying the California Rule is the constitutional contract clause, which prohibits state laws that impair contractual obligations. Because we conclude that California’s public employees have never had a contractual right to the continued availability of the opportunity to purchase ARS credit, the question of whether PEPRA worked an unconstitutional impairment of protected rights does not arise. … Our decision in this matter therefore expresses no opinion on the various issues raised by the state and amici curiae relating to the scope of the California Rule.

Comments:

Based on the oral arguments, this holding was not unexpected. Indeed, the decision was unanimous (although Justice Kruger wrote a concurring opinion).
Because the Court avoided addressing the California Rule, all eyes will now be on the Marin Ass’n of Public Employees v. Marin County Employees’ Retirement Ass’n case (Supreme Court Case No. S237460). That case has been on hold pending this case so there still needs to be briefing.
To the extent one can “read into” this decision, I think it’s significant that the Court recognized the existence of a “California Rule” and even characterized the request of the State—made at the direction of Governor Brown—as seeking to modify or depart from the California Rule. Perhaps it is insignificant, but framing the issue as such potentially makes any change to the California Rule that much harder.