MOORLACH UPDATE — California Rule — March 5, 2019

The California State Supreme Court ruled on the Cal Fire Local 2881 vs. CalPERS case Monday morning. What made this case important is that it addressed two issues.

The first is whether the Legislature could take back something. It can. The County of Orange learned this the hard way when SB 89 in 2011 allowed the state to take the vehicle license fee revenues away (see MOORLACH UPDATE — VLF Torpedo — May 9, 2013 and MOORLACH UPDATE — VLF Grab — August 12, 2013).

The second is whether municipalities can reduce pension benefit formulas on a prospective basis, which they have been prevented from doing as a result of what is known as the “California Rule.” The Supreme Court stated it was not ready to address this critical issue.

The Wall Street Journal and the OC Register cover the decision in the first two pieces below.

The OC Register’s Editorial Board wants to know your thoughts on the high speed rail project and requests your input in the third piece below.

In the fourth piece below, the Daily Pilot covers a very poor decision made by Newport-Mesa high school students. It was photographed. It went viral. And, it was disappointing. Especially to me. My folks, and their families, endured Nazi occupation during World War II.

Monday afternoon I was in conversation with the Simon Wiesenthal Center’s Executive Director and two members of the NMUSD Board of Trustees to provide an educational opportunity of either visiting the Museum of Tolerance for free and/or attending the opening of the “Courage to Remember” exhibit at Irvine Valley College next Monday evening. We must never forget.

California Court Approves Retiree Cut but Keeps Larger Worker Protections in Place

Justices didn’t alter longtime rule that has treated government pensions as sacrosanct


Heather Gillers

The California Supreme Court affirmed the state’s ability to roll back a specific pension benefit but left in place an influential rule offering public workers protection against cuts.

The case was closely watched due to California’s outsized influence over how public pension benefits are perceived across the country.

The “California rule” has for decades treated government pensions as sacrosanct. Other states across the U.S. operate under the same rule, making it difficult to impose cuts on existing public workers. Many prior efforts to reduce these benefits have been blocked by courts around the country.

The decision from the California Supreme Court on Monday left that core protection intact. But the court also ruled the state acted lawfully in 2013 when it curtailed the ability of public workers to add more years of service to their employment record by paying a fee—an “air time benefit.”

“It isn’t this big game-changing opinion that a lot of people were hoping for,” said University of Minnesota Law School professor Amy B. Monahan.

The case was brought by Cal Fire Local 2881, a union representing state-employed firefighters. The firefighters claimed the new 2013 state law had run afoul of the state Constitution, which prohibits state laws from impairing existing contracts. The California Supreme Court allowed the cuts to stand, saying the “air time” benefit didn’t amount to a constitutionally protected contract with workers.

California and many states across the U.S. are struggling with large retirement funding deficits due to lengthening life spans, over-optimistic return assumptions and deep losses during the 2008 recession. Estimates of that collective gap in the U.S. range from $1.6 trillion to $4 trillion, according to the Boston College Center for Retirement Research and Moody’s Investors Service.

The largest public retirement system in the U.S., which is based in California, had just 68% of what it needed to fulfill future benefits as of January, the fund’s chief investment officer said in a meeting last month.

“This is a critical issue for state and local government’s ability to deliver services and to ensure the retirement security of our hard-working public employees,” said a spokesman for California Gov. Gavin Newsom, a Democrat who took office in January. California state Sen. John Moorlach, a Republican, said in a statement that the court missed an opportunity to address “one of the most pressing issues of our time.”

But there are other cases pending before the state Supreme Court, Mr. Moorlach said, that could still address the question of constitutional protections for pension benefits.

“Everybody who wants to determine the fate of the California rule from this opinion is, I’m afraid, going to have to stay tuned for the sequel,” said Gregg Adam, one of the attorneys representing Cal Fire Local 2881.

Write to Heather Gillers at heather.gillers

Supreme Court upholds piece of former Gov. Jerry Brown’s pension reform law

Public employees can’t buy time they haven’t actually worked to boost benefits


Government workers do not have the inviolable right to buy credit for years of service they haven’t actually worked and thereby boost retirement benefits, the California Supreme Court concluded Monday in a widely anticipated decision.

But the court dodged the elephant in the room — whether state and local governments have the right to alter pension formulas for current workers going forward.

California has long considered public pension promises as contracts etched in stone, arguing that retirement formulas in place on the first day of employment can be raised, but never lowered, and any attempt to do so violates the California constitution.

This has come to be known as the “California Rule,” because other states allow such changes.

Monday’s decision on the purchase of “air time” had something for everyone to hate, and left both sides reading the tea leaves as cases more directly challenging the California Rule come before the Supreme Court.

“There was always some question about whether air time was a vested benefit,” said Ted Toppin, chairman of Californians for Retirement Security, a coalition of public employee unions, in a statement.

“The decision was not unexpected. More importantly, the Supreme Court leaves intact the California Rule, holding that vested benefits cannot be impaired. Thankfully, the decision protects the retirement security of California’s nurses, teachers, firefighters, school employees and countless other public servants and retirees dependent on their hard-earned pensions.”

While Chuck Reed, pension reformer and former mayor of San Jose, called it “a good, solid win,” Carl DeMaio, fellow reformer and former San Diego city councilman, was deeply disappointed that the court punted.

“This is like someone on the Titanic saying, ‘I have a handy dandy bucket and I’m going to scoop up some water, but I’m not going to do anything about the hole in the side of the ship,’ ” DeMaio said. “This is a ticking time bomb. We are running out of time.”

Stanford University’s Institute for Economic Policy Research pegs California’s unfunded pension burden at $331.7 billion — or $25,623 per California household — as measured by pension plan officials assuming investment returns of about 7 percent.

But when measured on a “market basis” — assuming a lower investment return of 3 percent, which is what CalPERS uses for agencies wanting out of its system — the unfunded burden is a mammoth $1 trillion, or $78,265 per household.

Sen. John Moorlach, R-Costa Mesa, who has long championed pension reform, was circumspect.

“It’s sort of like half a loaf, telling us what we already know,” he said of the air-time ruling. “But when you give someone a pension benefit, it can’t be an elevator that only has an up button. You have to have a down button sometimes to protect the sustainability of the plan.”

Specifically, the ruling involves the Public Employees’ Pension Reform Act of 2013, which enacted tweaks to the system proposed by then-Gov. Jerry Brown and adopted by the Legislature. PEPRA is expected to save money over the long haul, but contribute little in the short haul.

Monday’s decision focuses narrowly on the constitutionality of one PEPRA change — eliminating the opportunity for public workers to buy up to five years of “additional retirement service” credits.

“Participating employees could therefore receive pension benefits calculated on the basis of up to five years’ more public employment than they actually worked,” the court said. “PEPRA effectively repealed the statute granting public employees the opportunity to purchase ARS credit, although it did not alter the rights of employees who had already purchased such credit.”

Is buying air time a vested right protected by the contract clause that cannot be violated without running afoul of the state Constitution? No, it is not a vested right, the court concluded, affirming the decisions of lower courts.

All eyes are now on cases involving Alameda and Marin counties, pending before the Supreme Court and cutting closer to the heart of the California Rule. Lower courts have concluded that governments do, indeed, have wiggle room.

“While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension,” wrote Justice James Richman in the case involving Marin County.

“And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a ‘reasonable’ pension, there is no constitutional violation.”

Toppin, of Californians for Retirement Security, said that amounts to pulling the rug out from under public workers.

“It’s saying that the promises made to you when you were hired aren’t worth the paper they’re printed on,” Toppin said. “Obviously, we disagree with that ruling.”

The Supreme Court is where the scholarship is, Moorlach said. “We have to get it resolved. The longer we wait, the more these liabilities pile up.”


Question of the Week: Is it time to call it quits on the bullet train?


How far is it you thought California’s long-promised high-speed rail system was going to go?

San Diego to Sacramento? Or a southern start instead in Anaheim? Or simply Los Angeles to San Francisco?

Whichever version you believed was promised to the state as a coming transit option, Gov. Gavin Newsom in his first State of the State address threw cold water on the already dwindling bullet-train flames by saying the route would for the foreseeable future be limited to a link between the Central Valley cities of Bakersfield and Merced.

It’s no knock on our fellow Californians living in that rural, agricultural stretch of the state to say that the new proposed train route is, well, entirely undramatic.

Then came the news that the project will probably run out of money even before track can be fully laid on the new, vastly shorter train line.

However diminished, is the more realistic proposal still worth it for taxpayers as an investment in a longer rail route sometime in the future?

Or is the bullet train such a preposterous boondoggle that a stop-work order ought to be implemented tomorrow so that our state can stop throwing good money after bad?

That’s our Question of the Week for readers.

Who and what is to blame for the debacle? How is it that other countries — from communist China to capitalist Japan to in-between France and Spain — can build vast, commercially successful high-speed rail networks and yet California apparently cannot?

If the project is to be entirely abandoned, what would you do with the construction work that has already been performed?

Was the route the problem in the first place? Rather than detouring through Central Valley cities, should the planned train have been aimed straight up the middle of Interstate 5, so that new land did not have to be acquired by the state?

Does the high-tech fiasco make you more inclined to support the California autobahn proposal of state Sen. John Moorlach, R-Costa Mesa, to add no-speed-limit lanes to the 5 and 99 instead?

Email your thoughts to opinion. Please include your full name and city or community of residence. Provide a daytime phone number (it will not be published).

Shock and disgust on campuses after Newport-Mesa students are pictured saluting a makeshift swastika, though some aren’t surprised


Amid community outrage after social media images appeared to show area high school students at a weekend party saluting a swastika assembled from red plastic cups, campus reactions Monday ranged from shock to unsurprised, though the actions were roundly condemned.

A community meeting about the incident was held Monday evening at Newport Harbor High School, which many of the students at the party attend.

The Newport-Mesa Unified School District said it is investigating the images, posted on various social media, which also show the students smiling, laughing and toasting over the swastika, which appeared to be used in a drinking game.

Students from Costa Mesa High and Estancia High, also in Costa Mesa, said Monday that students from both of those schools also were present.

“While these actions did not occur on any school campus or school function, we condemn all acts of anti-semitism and hate in all their forms,” Newport-Mesa Supt. Fred Navarro said in a statement.

But Jocelyn Navarro, a junior at Newport Harbor in Newport Beach, said Monday that she wasn’t surprised when the photos surfaced Sunday morning onSnapchat and Twitter.

At Newport Harbor, she said, students group themselves along racial lines: Hispanic students with other Hispanics, whites with whites. It is less intentional than unconscious, she said.

“White people stay together, Mexicans stay together. We naturally just do it because we know that’s the way it is,” she said.

One student who posted a photo of the swastika surrounded by students told another student in an online conversation that “you are stupid if you think we actually support what Hitler did. It was a joke. None of us are … Nazi supporters.”

Parents of two students identified as being involved in the party declined to comment Monday.

Bianca Lutz, a 16-year-old Newport Harbor student who was not at the gathering, said she was “extremely disturbed by the ignorance of those at the party” and said some of her Jewish friends felt threatened.

Newport-Mesa spokeswoman Adriana Angulo said the district is working with the Costa Mesa and Newport Beach police departments on the investigation but didn’t provide details. She said district officials don’t know what their next course of action might be or what punishments could be meted out.

The party, which apparently took place over the weekend, occurred in Costa Mesa, according to Newport Beach police spokeswoman Heather Rangel.

On Monday, Newport Harbor students poured out of school buildings wearing every shade of blue as an act of solidarity with the Jewish community.

“I’m very glad that we are all making a statement that the vast majority of us believe that this is disgusting,” senior Sam Quattrociocchi said during lunch. “Some people at the party thought they were making an edgy joke, and they were completely wrong.”

Fellow senior Timothy Shannon said “most people are trying to figure out ways to better ourselves out of it.”

In Costa Mesa, the mother of two students who went to the party said she was “very upset” about their presence. The woman, who declined to give her name, said she wasn’t aware there was a planned gathering of teenagers and that alcohol would be served.

“The kids go out with their friends all the time. I’ve never seen my kids drink. I’ve never seen them drunk,” she said Monday.

Her children spent last weekend with her former husband and she did not hear about the party, where it was held or the swastika incident until Sunday, she said.

She said her anger and sadness stem from the fact that she is Jewish, along with her family members.

Antonio Fair, a junior at Costa Mesa High, said: “I feel like they just did something stupid and sure it is offensive to a lot of people. But I feel that it shouldn’t be as big of a deal only because we’re still young. I feel like if they didn’t get drunk or if they didn’t smoke, then they wouldn’t have done something that stupid.

“I think there should still be consequences but that shouldn’t stick with them for the rest of their life. It shouldn’t define who they are, because we’re still in high school.”

Images from the party roiled social media users, who were quick to condemn them.

“As an organization dedicated to representing the students of Newport Harbor High School, we and the school administration denounce and condemn all acts of anti-semitism and hate in any form,” representatives of the school’s Associated Student Body said in a statement on Instagram. “Any negativity due to any type of persecution is utterly wrong, unacceptable and will not be tolerated. … With all of the bad out there, we encourage everyone to turn to goodness, kindness and respect over hatred.”

Newport Harbor Principal Sean Boulton said in a statement that Monday’s community meeting at the school was to include him, Costa Mesa High Principal Jacob Haley, Estancia High Principal Michael Halt and Rabbi Reuven Mintz of the Chabad Center for Jewish Life.

“The goal of the event is to start a significant conversation to take us to a place where this sort of behavior never happens again in our community,” Boulton said. “Over the past few years, all Newport-Mesa schools have worked tirelessly to eliminate prejudice, hate and bullying and continually work toward true tolerance and equality. We are obviously not there yet, but the journey continues.

“Diversity is the backbone of our schools, but in this social and social media climate, we are subject to hate, offensive acts/language and religious intolerance. We must and can do more.”

Rabbi Gersh Zylberman of Temple Bat Yahm in Newport Beach said in a statement that a town hall meeting is tentatively set for 6 p.m. Thursday at Corona del Mar High School to discuss the incident.

“This is a reminder that we must respond to all incidents of anti-semitism and bigotry in all forms with the utmost seriousness and unequivocal condemnation,” Zylberman said.

“It doesn’t matter whether or not they thought it was funny. When we joke about Nazism, its history loses meaning — and we cannot forget that history,” U.S. Rep. Harley Rouda (D-Laguna Beach) said in a statement. “These students must learn that hate has consequences, and their parents and our school district must redouble their efforts to teach them.”

Costa Mesa Mayor Katrina Foley, a former Newport-Mesa Unified trustee, said in a statement that “we need to seriously address why teens in our community might think these types of hateful symbols are acceptable or funny and worthy of selfies. We must use this incident as an opportunity to work with our school district leaders to encourage schools to implement better anti-bias and anti-hate content in their curricula and extracurricular activities.”

Josdel Hernandez, a Newport Harbor junior, said students just last month studied the Holocaust in history class.

“They showed us graphic videos of the concentration camps,” she said. “It’s not like our teachers need to show us any more about the Holocaust. They knew what it means.”

She said she’s seen incidents of more casual racism at school: a student doodling a swastika on a desk, for example, or cracking a joke about Nazism.

Quattrociocchi said “the real problem is that a lot of real neo-Nazis and racists are coming away being emboldened by this.”

“I think the most unfortunate thing is that people are suddenly feeling comfortable spewing racist garbage,” he said.

Josdel and Jocelyn said students who condemned the Nazi displays faced a backlash on social media from party-goers who questioned why people not of Jewish heritage were upset.

“They said, ‘You’re not even Jewish — why are you getting all offended?’” Jocelyn said. “We don’t have to be Jewish to be offended. We’re offended because it’s wrong.”

On Monday morning at Costa Mesa High, Haley spoke to the school via the public address system, saying he was “disappointed” that some of his students were at the party.

Freshman Maria Ramirez said she was “kind of shocked that this happened because people need to take responsibility for their actions. Why would you get into that kind of stuff if you knew what these things mean?”

Kevin Sanchez, a sophomore who transferred to Costa Mesa High last month from Newport Harbor, said he worries about how much freedom teenagers are given today: “Parents or adults can’t tell them what to do basically, and they don’t realize how they act reflects on the whole school.”

Newport Beach Mayor Diane Dixon and Mayor Pro Tem Will O’Neill said in a joint statement that they were “appalled and saddened” by the incident and that it was “not acceptable and not reflective of our community’s collective character.”

“This behavior is not learned in our schools,” the statement said. “But once learned — wherever and however it is — anti-semitism can and must be unlearned through education and dialogue.”

Navarro said district officials “remain focused on educating students on all aspects of life’s challenges and are committed to holding students accountable, educating them on the consequences of their choices and the impact these actions have on our schools and community at large. We are asking that parents please partner with us in helping students make good decisions, be respectful of others and to always use good judgment.”

State Assemblywoman Cottie Petrie-Norris (D-Laguna Beach) announced Monday that she will convene an interfaith town hall from 1 to 3:30 p.m. March 30 at Christ Our Redeemer AME Church in Irvine “for a conversation about how we can come together to battle hate and foster respect.”

State Sen. John Moorlach (R-Costa Mesa) also expressed “condemnation of any and all anti-semitic acts, and again emphasize my solidarity with the Jewish community in Orange County and elsewhere.”

Lilly Nguyen and Julia Sclafani are Daily Pilot staff writers. Matthew Ormseth and Anh Do write for the Los Angeles Times.


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