Case tests pension sustainability

In a matter of months, California may get an answer on fixing its unsustainable public pension system. The state Supreme Court is due to rule on a politically loaded case that could open the door to peeling back retirement benefits in the name of fiscal need.

The case deals with an odd corner of state worker benefits: a since canceled fringe benefit that allows employees to buy extra years of service to sweeten their final retirement payout. This feature dubbed “airtime” was promised to workers until it was ended in 2013 in a modest pension overhaul approved by the Legislature and Gov. Jerry Brown.

But that change was protested by employee unions who claim the revocation is unfair to those who went to work while it was still being offered. You can’t break a promise, the lawyers told the high court in challenging Brown’s signing.

Quirky as airtime sounds, it’s the edge of a much larger issue on protecting pension rights embodied in the so-called California Rule. For decades, the courts have sided with arguments that pensions can’t be altered without compensation, an approached adopted by a dozen other states.

Between the lines, Brown is offering a different thought: You can’t promise money that isn’t there. The California’s public pension pool is tens of billions short of being fully funded, with cities feeling the same pinch. Pension promises made with the best intentions or from political loyalty may prove impossible to deliver.

Faced with a sweeping decision on whether pensions are sacrosanct, the jurists may want to whittle down the scope of their decision. Several judges quizzed the union lawyer to suggest the airtime benefit wasn’t a bedrock pension right since it was a choice that each worker could make or ignore. “It’s only an opportunity to purchase,” noted Chief Justice Tani Cantil-Sakauye. A narrow ruling could be in the offing that skirts the larger issue of financial reality pressuring retirement pay.

The political backdrop makes a court decision key because lawmakers don’t want to touch the issue. California is running a $15 billion surplus and Sacramento is in the hands of a Democratic supermajority backed by powerful public employee unions, factors that don’t suggest incoming governor Gavin Newsom is about to launch a pension-cutting crusade.

Brown’s goal is the right one. Pensions need to be matched to what’s balanced and reasonable, not unsustainable pledges. If the economy hits a down cycle, state and local revenues will plummet, saddling government with unpayable bills just as California witnessed a decade ago. The courts should recognize this hovering problem and acknowledge the need to make most changes in pension promises in the future.