Public employee pension rights may be more resistant to political attack than they seemed several years ago. Public employee groups have defended their rights vigorously, and often successfully, in court.
When the public and private sectors absorbed the impact of the 2007 housing downturn and the 2008 financial crisis, public employee retirement benefits made a convenient political target. After all, the investment portfolios that held members’ hard-earned contributions had just crashed in value. When actuaries started reporting funding levels based on the new portfolio values, certain politicians seized on the numbers and starting weaving a narrative blaming public employees for an economic downturn they did nothing to cause.
Many public employers demanded rollbacks of pension benefits and new employee contributions. When they could not get these at the bargaining table, some public employers simply imposed them by fiat. It looked like they might get away with it too, because the erosion of private pension rights had softened up public opinion for an attack on the few secure retirement programs left—those for public employees.
The good news is that despite all expectations, neither the public nor the courts seem to be buying it. This presidential campaign season saw the rapid flame-out of Scott Walker, the Governor of Wisconsin who made his name attacking public employee benefits. New Jersey Governor Chris Christie, whose brand was built on never-ending attacks on public employees, especially teachers, also got no traction on the national stage. In California, this is the second election cycle in a row where highly touted pension rollback initiatives did not survive the signature-gathering stage to make it to the ballot.
You know a political movement is in trouble when it starts to become the punch line of jokes—like the joke at the end of the movie The Big Short. The audience gets two hours of detailed exposition on the banking machinations that led to the financial crash. Then the narrator reveals who got blamed: public employees, especially teachers. The irony is unmistakable when the average public employment pension in California is less than $30,000 per year.
Courts have been mixed when faced with retirement benefit rollbacks since the Great Recession. In a 2011 case I argued on behalf of the Retired Employees Association of Orange County, the California Supreme Court ruled that government employers must abide by their contracts for retirement health benefits. (The retirees in that case, however, ultimately saw their health benefits cut back with approval from the federal courts.)
Courts in Illinois have refused to allow public entities to take away retirement health benefits. The Supreme Courts of Washington and Connecticut have recognized the importance of retirement health benefits as part of an overall bargain that the public made with police, firefighters and other employees. In a 2014 case handled by RBGG, the Los Angeles Superior Court struck down a retirement health benefit freeze that the City of Los Angeles imposed on its police and firefighters in 2011. On March 7, 2016, the Second District Court of Appeal reversed the lower court order, and ruled that the City Council was entitled to take control of the health benefit in 2011, and even to freeze it, but that the Council must still exercise annual review over the freeze. The employees may ask the California Supreme Court to review the case.
As the economy recovers from the shocks of 2007 and 2008, the public is growing skeptical of attempts to shift blame for the crisis onto police officers, firefighters and teachers. The Great Recession aggravated already declining trust in government and social institutions. The legal system has weathered this kind of crisis many times before—during the Great Depression, the stagflation of the 1970s, the Proposition 13 shocks to local government financing, and the dot-com crash. Each time before, the Courts have held firm to the rule that we keep our promises to friends and neighbors who choose to do dangerous and challenging work for the public good. The legal system’s job is to put a brake on panic and alarmism.
– Contributed by Ernest Galvan