Writing new contract law

WA Post reviews the California Rule on public pensions.  The California Supreme Court expanded public labor contracts to include an implicit guarantee for future pension vesting.  This is new contracts law, a pure fiction imposed on specific forms of employment contracts, Sotomayor style.  As a result, public sector employment contracting has been a severely inefficient process.  There is no viable rule; at any time the Supreme Court can make up impositions on existing contracts, Sotomayor style.  This bungles up the economy something fierce.

The California rule was created in 1955, when the California Supreme Court considered a challenge to a 1951 city charter amendment in Allen v. City of Long Beach (Cal. 1955). The amendment raised the amount of employees’ retirement contributions from 2% to 10%. It changed the pension from a fluctuating amount (based on the salary attached to the retiree’s previous position at the moment pension payments are made) to a fixed amount (based on the retiree’s salary around the time of his retirement). And it required extra contributions from employees who had returned from military service.
The Court held that the amendment unconstitutionally impaired the contract rights of the employees who were adversely affected. In doing so, it stated a test that would be often repeated in public employee pension cases:
An employee’s vested contractual pension rights may be modified prior to retirement for the purpose of keeping a pension system flexible to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system. Such modifications must be reasonable . . . . To be sustained as reasonable, alterations of employees’ pension rights must bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages.

What was going on in  the 50s that caused such ignorance on the part of the state court?