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By PORAC | June 1, 2011 | Posted in PORAC LDF News

Victory For Public Employees In Orange County Retirement Case

Posted by Gary Messing Jason Jasmine

Your pensions have been under attack for the last couple of years — a trend that is alas unlikely to subside any time soon. One of the first salvos in the pension battle was the County of Orange’s (County) attempt to rescind its own actions granting Orange County deputy sheriffs the 3%@50 retirement formula for prior service (in addition to prospective service). The County spent millions of dollars arguing this case, going through several law firms, all with the purpose of demonstrating that its own actions (or at least those of a prior incarnation of the Board of Supervisors) were not illegal.

Recently, and within a week of the oral argument in the case (an unusually short turnaround), the Court of Appeal for the Second Appellate District affirmed the decision of the trial court and rejectedthe claims by the County of Orange (and the arguments made by the amicus curiae briefs filed by various taxpayer groups supporting the County of Orange) that the application of the 3%@50 formula to past service violated the California Constitution’s prohibition on gifting of public funds.

On April 23, 2011, the California Supreme Court denied the County’s petition for review, thus affirming the Court of Appeal’s decision.

PORAC had been a constant ally of the Association of Orange County Deputy Sheriffs (AOCDS) in its fight to protect their benefits. Additionally, Carroll, Burdick & McDonough (CB&M) gathered a coalition of 21 public safety and miscellaneous associations throughout California to support the preparation and filing of an amicus brief, focused primarily on the impact the County’s position would have on the rights of public employees throughout California if its position were adopted by the Court. The amicus brief also focused on the frequent retroactive nature of the collective bargaining process.

The County made two primary arguments under the California Constitution, and the Court of Appeal ruled against the County on both of those arguments.

First, the Court agreed that the crediting of prior service at the increased rate did not violate the restriction under the California Constitution on a local public entity incurring “indebtedness or liability … exceeding in any year the income and revenue provided for such year … ” The Court agreed with a 1982 attorney general opinion dealing with a similar constitutional provision, limiting the State’s indebtedness, which stated that an “unfunded liability” such as future pension obligations is not legally enforceable, but is rather nothing more than a projection of anticipated future events. Thus, because the unfunded liability created by the crediting of prior service is nothing more than a projection, it cannot violate the municipal debt limitation in the California Constitution.

Second, the Court also agreed that the County’s actions in crediting prior service under the enhanced formula did not violate the California Constitution’s prohibition against extra compensation for services already rendered. On that issue, the Court provided a detailed analysis of a long history of California cases to come to the conclusion that the prior service portion of the enhanced benefit is not unconstitutional extra compensation, based in part on the fact that the enhancement did not provide additional compensation, but rather changed the calculation of the pension benefits upon retirement. The Court echoed arguments that we set forth on behalf of our coalition. The County altered the prior pension benefits and perhaps provided an incentive to retire, but did not provide additional compensation as that term is defined in the California Constitution.

This is a huge win for public sector unions and the employees they represent. If this decision is left undisturbed, it should help deter other groups from challenging retroactive pension increases throughout the State. The battle may not be over. Although U.S. Supreme Court review is incredibly unlikely, the County previously indicated that it might attempt to persuade that Court to review the case. We anticipate that both the AOCDS, as well as the coalition we have formed, will fight any attempt by the County to come after vested pension benefits.

CB&M represented 21 associations (with approximately 80,000 members) on whose behalf we filed an amicus curiae brief setting forth the interests of State and local public employees in support of the Association of Orange County Deputy Sheriffs. This was a group effort by CB&M in which the Public Sector Group (led in this case by Gary Messing, Gregg Adam, Jason Jasmine, Jonathan Yank and Jennifer Stoughton) enlisted the assistance of CB&M’s Appellate Group (led in this case by Laurie Hepler and Gonzalo Martinez).