Here is one observer's view on today's important pension rights oral argument before the California Supreme Court in Alameda County Deputy Sheriffs' Association v. Alameda County Employees' Retirement Association:
1. Gavin is largely reading from Jerry's playbook. The Brown Administration argued aggressively that future public employee pension benefit accruals should not enjoy constitutional protection. In today's argument, counsel for the Governor made clear that the California Rule remains firmly in the new Administration's crosshairs.
2. Don't expect the economic impacts of the pandemic to play a significant role in the decision. Right out of the gate, counsel for the Governor cited dire predictions of COVID-19-caused economic doom to support his position. With the exception of a single late question by Justice Groban, the Justices didn't bite. Historically, the Supreme Court rules based on evidence, not conjecture. PEPRA suffered because it lacked meaningful evidence of financial impacts in its legislative history. This caused the appellate court in Marin Association of Public Employees v. Marin County Employees' Retirement Association, which started this round of pension cases in 2015, to cobble together as "evidence" various law reviews and policy papers. While there are better backdrops than a raging pandemic, evidence of its economic impacts does not yet exist to influence this case.
3. "You Say Spiking, I Say Following the Rules." When employees greatly inflate their pensionable compensation in ways that the system could not have comprehended or funded (i.e., "spiking"), nobody wins, especially others in the system. But "pension spiking" is a term needlessly overused. The Governor kept baiting the Court with allegations of "spiking," but Alameda is not a spiking case, because all of the payments were actuarially accounted for. Justice Lui, for one, seemed to nip the name-calling in the bud by noting that what some may today denigrate as spiking, to others, previously, was playing within the rules.
4. Expect the Court to resolve "must" versus "should." For at least 40 years, conventional wisdom understood the California Rule to require that negative changes to pension benefits "must" be offset by comparable positive ones. In 2015, the appellate court in Marin Association of Public Employees, in striking down a PEPRA challenge, noted that the Supreme Court used the phrases "must be offset" and "should be offset" in different cases, and that it probably meant "should," not "must," all along ... and "should" is not a legal obligation but a moral one. As counsel for the Governor noted today, three subsequent courts of appeal have acknowledged that reasoning, which would defang the California Rule. (Notably, all four cases are before the Supreme Court on review.) During today's argument, Chief Justice Cantil-Sakauye asked counsel to address any distinction between "must" and "should." In reality there isn't one: the cases which have used "should" have nonetheless required offsetting comparable advantages. But the fact the Chief Justice asked the question probably means the issue is addressed in the draft opinion for this case that the Justices would have had in front of them during oral argument.
5. Beware of Silent Assassins. Public employees and their advocates can feel cautious optimism at how oral argument went. The Justices had few hostile questions for union counsel; whereas counsel for the Governor was hard-pressed by Justices Liu and Cuellar in particular. But three of the Justices said nothing, while two others asked garden variety questions. Sometimes the most active Justices during oral argument are trying to shift undecided or wavering colleagues to their point of view.
A decision is expected within 90 days.
If you have any questions about this alert, please contact Gregg Adam.