In fact, many states, including the blue states Republicans in Washington love to demonize, have spent the years since the last recession trying to shore up their pension systems — with egregious exceptions such as Illinois, the worst-run system in the country. Yet even Illinois would have found it much easier to reform but for a state Supreme Court ruling in 2015 that interpreted the state constitution’s provision on pension obligations as a rigid ban on benefit trims. In 2018, by contrast, Rhode Island’s Supreme Court upheld a negotiated settlement between the state and public employees that preserved the essence of a 2011 pension reform spearheaded by Democratic Gov. Gina Raimondo when she was state treasurer.
Which brings us to California, and the California Supreme Court. The seven-justice panel heard arguments Tuesday in a case that will determine the viability of a 2012 pension reform law enacted by a Democratic legislature at the urging of then-Gov. Jerry Brown, also a Democrat. The financial savings were, to be sure, modest: $28 billion to $38 billion over 30 years for the $300 billion-plus California Public Employees’ Retirement System, and $22.7 billion for the $200 billion-plus state’s teacher pension fund. Yet the bill was important just the same, because it banned egregious “pension-spiking” practices such as running up overtime just before retirement or allowing public employees to hoard their last few years’ of unused vacation and sick leave, then exchange them for higher pension benefits.
Mr. Brown’s successor, Gov. Gavin Newsom (D), is asking the state Supreme Court to uphold the law. Some California public-employee unions are dead-set against even these common-sense proposals, but at oral argument, a lawyer for the state, Rei Onishi, reminded the court of the vital interests on the other side. “Public services are being cut across California, some jurisdictions have already announced layoffs and furloughs of public employees and many counties and cities are struggling to pay for their pension liabilities,” he said. “The question presented by this case is whether on top of legitimate pension liability, should taxpayers along with their children and even grandchildren, be forced to also shoulder the burden of financing abusive practices to artificially and unlawfully inflate pensions.” It’s the right question, and California’s justices can set a national example by delivering the right answer: a resounding “no.”