Yuki Cruse, with Meyers Nave.
In its much-anticipated ruling in Cal Fire Local 2881 v. California Public Employees’ Retirement System, the California Supreme Court avoided opining on the long-standing pension rule, known as the “California Rule,” which is a state court interpretation of constitutional law that prohibits reduction of pension benefits unless they are offset by comparable new benefits. The Cal Fire decision was closely watched because the court’s interpretation of the California Rule could significantly impact the opportunity for pension reform in California. A narrow interpretation would keep the protective California Rule legal doctrine intact and state and local lawmakers’ ability to revise the laws governing public employee pensions would continue to be hindered. On the other hand, a broader interpretation could have created the possibility of pension reform regarding reduction of benefits that have not yet been earned.
For now, the California Rule remains intact, but the state Supreme Court is expected to hear two cases that have resulted in a split among divisions in the First District Court of Appeal. Once again, public employers are hoping the court will take the opportunity presented by these two cases to open at least a small door to modifying specific pension benefits if not also a big door to larger pension reform.
