One of the pervasive challenges of long term pension reform is the ability and right for employers to change existing employee benefits.

Some say it can’t be done. Actually, most say that.

But at least one law firm disagrees. It’s an article that came to me because of Manteca City Manager Steve Pinkerton’s blog.  

He makes the case that the current political and financial environment make pension reform for future employees attractive, and nearly unbeatable in public opinion. But he remarks that labor unions will fight any “punitive” actions taken against existing employees in court.

In part of the “groundswelling” of legal opinions sthat he see, some are starting to say that the union’s legal challenges may not be as foolproof was was once started. You can read his remarks here.

The legal briefing he refers to offers some of the meatier content.

From Chang, Ruthenberg and Long:

The boom days of the millennium decade’s early years are over, but the now unsustainable benefits packages negotiated by California state and local governments and their employees remain – some representing as much as 40 percent of overall budget costs. Our discussions with local government managers and their advisors suggest a tremendous amount of confusion and misinformation about their ability to align employee benefits costs with their fiscal realities. This article discusses one source of much of the confusion – interpretations by California courts of the Constitutional prohibition against impairment of contracts – and why local governments have more latitude than they think.

Much of the confusion over the rights of public employees to retirement benefits stems from the way California courts have described these rights. In San Bernardino Public Employees Association v. City of Fontana, the Court of Appeal quoted Kern v. City of Long Beach: “[w]hile payment of these benefits is deferred, and is subject to the condition that the employee continue to serve for the period required by the statute, the mere fact that performance is in whole or in part dependent upon certain contingencies does not prevent a contract from arising, and the employing governmental body may not deny or impair the contingent liability any more than it can refuse to make the salary payments which are immediately due.”

The common understanding of this language is that a governmental body cannot modify or reduce a promised pension or retirement benefit without running afoul of the Constitutional prohibition against impairment of contracts. However, we believe that local governments actually have considerably more latitude to change retirement benefits.

Read their full article here.