Public employee pensions were unconstitutionally curtailed, attorney argues

LOS ANGELES -- An attorney representing firefighters and their union argued Wednesday before the state Supreme Court that his clients were unconstitutionally deprived by a state law of the ability to purchase extra pension service time.

The benefit allowed certain public employees, after five years of service, to purchase up to five years of "airtime" that would be counted toward their eventual pension.

With a firefighter pin on his lapel and a high school constitutional law class in attendance, Gregg McLean Adam of Messing Adam & Jasmine LLP argued for Cal Fire Local 2881 that airtime purchase was a vested contractual right protected by the contract clause of the California Constitution.

"At its base, this is a question of: 'Do we keep our promises as a state to our public employees?'" he said, echoing a central theme in briefs prior to arguments.

Adam argued that the benefit, which was introduced by the Legislature in 2003 and eliminated by the Pension Employees' Pension Reform Act of 2013, was part of the total pension package taken into account by workers when making the decision to work for the state. He also said that the opportunity to purchase the time alone represented a constitutionally protected contract.

"The state is no more entitled to move the goalposts than promise our firefighters when they go to fight a fire that they can retire at 50, and change it to 60 when they come back," he said.

Rei Onishi of Gov. Jerry Brown's office appeared on behalf of the state, intervening for the California Public Employees' Pension System. He argued that without evidence the Legislature clearly intended airtime purchase to be a vested right, it was free to eliminate it.

"The touchstone is the Legislature's intent," he said. "Clarity is needed when you are going to read a vested contractual right."

He also separated airtime purchase from standard pension compensation by arguing it is not paid by the state in return for work, in part because the worker bears the cost. At the point the worker decides to take advantage and pays, Onishi said, is when a contract with expectation of payment is established, rather than simply when the opportunity is offered.

"If you haven't earned the compensation yet, there is no impairment," he said of the policy's rescission.

Throughout arguments, the justices peppered both attorneys with similarly intended questions that amounted to where their ruling should draw the line, regardless of the winning side.

"Is this just pensions?" Justice Goodwin H. Liu asked Adam, of what employment benefits should be considered vested, and free of legislative interference.

"I don't know where the line is," Adam responded, adding that he would leave those questions to arguments in the future.

Later during rebuttal, Liu again remarked, "Everything you're saying, reasonable as it sounds, has a very broad range."

Multiple justices asked Onishi what rights should be considered vested, or whether the Legislature has boundless authority to roll back employee benefits.

Onishi stressed that pensions are protected as deferred compensation, and protected as vested because they have been earned already, as opposed to future opportunities for enhanced benefits.

"Merely because someone is hoping for something in the future does not implicate the contract clause," he argued.

When deferred compensation was brought up to Adam, he said airtime purchase is deferred compensation, and not tied to the time served threshold or the purchase itself, but the opportunity promised to state employees.

Chief Justice Tani G. Cantil-Sakauye brought up a case in which the high court decided against an employee who sued claiming the state's decision to move mandatory retirement from 70 to 67 deprived him of pension due him.

Adam responded that that was a tenure case rather than a pension case, and that the plaintiff in that case still earned a pension based on the expectations he had when he was hired, rather than having a benefit eliminated.

The plaintiff "earned what he wanted, just not as much as it," Adam said.

In rebuttal, Adam also rejected the state's position that the benefit is not a vested right because the law does not expressly say so.

"There is not a single case, not one that I've seen, that says, 'This is a vested right.' That's not how statutes are written," he said.

The airtime purchase right was intended, according to proponents, to allow public employees to take time off with their families, spend time away from work, or continue their education while adding service time at no cost to the state.

In its brief to the Supreme Court, the state argued that in reality, the law led to early retirement and was not cost-neutral.

For that reason, it was repealed in an effort to preserve the solvency of the pension fund. That argument echoes the one put forth in Brown's 2011 Pension Reform Plan, which specifically mentioned a prohibition on buying airtime. This personal stake in the case's outcome is why his office argued the case.

The case is Cal Fire Local 2881 et al. v. California Public Employees' Retirement System et al. (State of California), S239958.