Kurt Kappes and Robert Milligan Published in the NAPPA Report

The November 2006 issue of the NAPPA Report (published by the National Association of Public Pension Attorneys) includes an article by Kurt and Robert ("California's SB 20 - The Latest Attempt to Divert Public Pension Funds to Address Fiscal Problems") states that pension funds have long been a target of state governments in search of solutions to fiscal crises and, fortunately, "these attempted raids of public pension funds are often unsuccessful." In the 1980s and 1990s, the California legislature tried without success to target state public employment funds for use in addressing state budgetary windfalls. In 2003, the state passed SB 20 which eliminates a $500 million appropriation to a state teachers' retirement fund, the Supplemental Benefit Maintenance Account ("SBMA"). The legality of SB 20 was successfully challenged in state court, with a judicial determination that SB 20 impairs vested contractual rights. The state of California appealed the state court's ruling to the Court of Appeal, Third Appellate District. State retirement systems and funds across the country are closely monitoring the case. The AARP and several state retired teachers' associations filed amicus briefs in support of the Retirees' position arguing, in part, that if SB 20 is not declared unconstitutional, state governments across the nation may be inspired to create similar schemes to raid public retirement funds. "It is clear whatever the Court of Appeal decides concerning the constitutionality of SB 20, the ultimate outcome will have a pronounced impact on those relying on public retirement benefits and the various approaches that state governments' employ to attempt to use such funds for other purposes."