CA cities gain tool to chop retirement benefits

CA cities gain tool to chop retirement benefits

A cliche in government circles is that there is no “magic bullet” available to address many big, difficult problems. But thanks to a recent action by the California Supreme Court, many local governments now do have a “magic bullet” to reduce their unfunded retirement benefits.

san.dilogoOn April 30, the court chose not to hear an appeal of an appellate court ruling upholding the city of San Diego’s 2011 deal rolling back retirement health benefits for city workers. San Diego City Attorney Jan Goldsmith had argued that while pension benefits for public employees are constitutionally protected, retirement health benefits could be reduced or rescinded because they amounted to a bequest from an employer to an employee.

As Goldsmith noted, the state Supreme Court’s action locks in the appellate court’s decision as a precedent for California. The decision found that retirement health care amounted to “additional benefits that are provided at the option of the City.” It held that existing law “does not mandate that these benefits be included in the City’s retirement system.”

Retirement health care benefits can be provided to workers using language that makes them a vested (guaranteed) right. Last September, a Los Angeles Superior Court judge rejected a freeze on retirement health benefits for Los Angeles city attorneys. Doug Rose, president of the California State Association of County Retirement Systems, told Governing.com that the benefit was found to be vested “because of the way it was written. It stated the premium subsidy [OPEB benefit] ‘will’ be provided. So it was unequivocal.”

Most retiree health benefits can be reduced or rescinded

Most retiree health benefits can be reduced or rescinded – See more at: http://calwatchdog.com/?p=63332#sthash.BHbfQDRs.dpuf
Most retiree health benefits can be reduced or rescinded – See more at: http://calwatchdog.com/?p=63332#sthash.BHbfQDRs.dpuf

But in general, the retiree health benefits provided by local governments are of the sort adopted by San Diego, provided by the employer after collective bargaining without any explicit or implied promise of permanence.

San Diego’s 2011 deal is forecast to save the city $714 million over 25 years; it reduces but doesn’t end health care benefits for current city employees when they retire. Since virtually every local government doesn’t prefund retiree health benefits, all that have the typical contracts with their unions could reduce their unfunded liabilities with a San Diego-type deal or by dropping health care as a retirement benefit entirely.

Gov. Jerry Brown’s 2011 statement of his goals for what would become his 2012 pension reform legislation included a provision on retiree health benefits that appears to encourage the more drastic approach — including for the state government.

“Contrary to current practice, rules requiring all [state] retirees to look to Medicare to the fullest extent possible when they become eligible will be fully enforced,” Brown wrote. “Local governments should make similar changes.”

It’s unclear if the rules for state retirees are enforced more now than in 2011. The website for the California State Retirees organization gives no indication of significant change.

Still, it’s noteworthy that the Democratic governor doesn’t give any credence to the argument from public employee unions that ending or reducing their retiree health benefits is part of a greater scheme to harm government employees.

14 comments

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  1. Donkey
    Donkey 7 May, 2014, 09:52

    Keep on chopping, it’s going to take a lot more than just healthcare benefits to stop the pension train wreck from happening. Cutting pensions to no more than the average household income is a start. 🙂

    Reply this comment
  2. Ted Steele, Manager
    Ted Steele, Manager 7 May, 2014, 10:25

    LOL “problem” solved

    Oh

    your mrtgage is due in full

    today ™

    Reply this comment
  3. Dork
    Dork 7 May, 2014, 13:52

    Goldsmith had argued that while pension benefits for public employees are constitutionally protected,

    More of the BIG LIE, You cannot Enforce a Contract that requires Future Generations to pay for your Wants today, it is by definition Involuntary Servitude, last time I looked we had an amendment Abolishing Involuntary Servitude. We don’t even need to get into how it is a Mathematical Impossibility to fulfill these Public Employee Pension contracts, making them by definition Fraudulent and a Ponzi Scheme.

    Reply this comment
    • Rex the Wonder Dog!
      Rex the Wonder Dog! 7 May, 2014, 16:35

      We don’t even need to get into how it is a Mathematical Impossibility to fulfill these Public Employee Pension contracts, making them by definition Fraudulent …
      ==

      SB400 was straight up fraud by calTURDS. I am WAITING for a member muni to sue them over it. Hasn’t happened yet but it is begging for a court case number…….

      Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 7 May, 2014, 23:00

    Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

    Reply this comment
  5. Bill Gore
    Bill Gore 8 May, 2014, 13:54

    Another triumph for Mike Aguirre!

    Reply this comment
    • Rex the Wonder Dog!
      Rex the Wonder Dog! 9 May, 2014, 00:39

      Mike was the Man!!! Chris Reed didn’t like him, but Mike was the solution.

      Reply this comment
      • Bill Gore
        Bill Gore 10 May, 2014, 07:45

        Yeah I loved that guy. Once the downtown status quo had awakened to the sunlight he was shining on their cozy little benefit machine, and how it made them look, they unified around the idea of Mike as ‘enemy’. Thereafter EVERY media mention of him was designed to paint him as a kook, with insiders hissing that he was ‘divisive’. They later used the same playbook to demonize DeMaio.

        Reply this comment
      • Bill Gore
        Bill Gore 10 May, 2014, 07:45

        Yeah I loved that guy. Once the downtown status quo had awakened to the sunlight he was shining on their cozy little benefit machine, and how it made them look, they unified around the idea of Mike as ‘enemy’. Thereafter EVERY media mention of him was designed to paint him as a kook, with insiders hissing that he was ‘divisive’. They later used the same playbook to demonize DeMaio.

        Reply this comment

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