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Appeals court hearing sets stage for California rulings on altering pension benefits

Two members of a California state appeals court panel on Tuesday repeatedly questioned lawyers representing county employees and the office of California Gov. Edmund G. "Jerry" Brown Jr. about whether the lifetime pension benefits given to government workers at time of employment could be altered to instead provide "reasonable pension benefits."

The hearing in San Francisco is a prelude to an expected ruling by the California Supreme Court on whether unfunded pension systems, and state lawmakers and the governor have the right to reduce pension benefits promised to public-sector workers.

Attorney Timothy Talbot, representing public safety workers in Alameda, Contra Costa and Merced counties, told Judges Ignazio Ruvolo and Maria Rivera that the only way such pension reductions could occur would be using a "dollar-to-dollar" substitution, in which pension benefits taken away are replaced with other benefits of equal value.

The benefit in question in the case was allowing workers to calculate unused vacation time and other leave time they had accumulated over the years and have the total pay added to their final year's salary, increasing their pension benefit.

The so-called pension spiking was outlawed by Mr. Brown's pension law in 2013, and Rei R. Onishi, Mr. Brown's deputy legal affairs secretary, argued Tuesday that there was never a "vested right" to such pension benefits, and the state was in its right to eliminate it.

Employees of the three counties filed suit to compel their retirement systems to continue to allow the unused time to be part of the final pension calculation.

Attorney Harvey Leiderman, representing the $8.3 billion Contra Costa County Employees' Retirement Association, Concord, and the $7.9 billion Alameda County Employees' Retirement Association, Oakland, told the two-member court panel that both county retirement systems are only following state law in not calculating long-term accumulated vacation or leave pay for a final pension benefit.

In a challenge to the constitutionality of the reduced benefits under the new law, a trial judge in Contra Costa County had ruled in May 2014 that using the accumulated vacation time to increase pensions was "unlawful."

Whatever the appeals panel ultimately rules won't be final because the California Supreme Court had already agreed to hear the appeal of the case. The court said it will consolidate the case with the decision of another state appellate panel that ruled on vested pension rights in August 2016.

The other state panel had concluded that employees in Marin County were only entitled to a "reasonable pension benefit," not their original pension guarantee. The case involved the $2.3 billion Marin County Employee's Retirement Association, San Rafael, which cited Mr. Brown's pension reform in denying on-call pay toward calculations of final pension payouts.

A third case involving pension rights, which has not been consolidated with the Marin pension case or the case involving retirement systems in Alameda, Contra Costa and Merced counties, is also scheduled to be heard by the California Supreme Court. That case involves whether state firefighters could buy additional pension credits from the $345.1 billion California Public Employees' Retirement System, Sacramento, to enhance their pension benefit.

Yet another appeals panel had ruled in December 2016 that such a practice was prohibited by Mr. Brown's pension reform law.

The Supreme Court is expected to hear oral arguments in that case early next year, putting it ahead of the other cases on the court calendar in terms of a potential decision.