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Editorial: Follow this lawsuit
Orange County case key to public pensions
Published 12:00 am PST Friday, February 1, 2008
Story appeared in EDITORIALS section, Page B6
When the Orange County Board of Supervisors voted unanimously this week to file a lawsuit seeking to repeal part of their pension agreement with county sheriff's deputies, it must have sent alarm bells ringing in public employee union offices around the state. Depending on how this lawsuit plays out, it could have profound repercussions for virtually every state, county, city and special district employee in California. Here's why:
Orange County supervisors are arguing that the retroactive increases in pension benefits that a previous board granted to deputies are unconstitutional. That deal changed the way the county calculated benefits.
It allowed deputies to retire with full benefits younger, at age 50, and it increased benefits substantially. Under the old rules, pensions were calculated by multiplying a deputy's highest year's salary times the number of years worked, times 2 percent. The new formula uses a 3 percent multiplier. So, a deputy who worked 25 years would get 75 percent of his last highest year's pay in retirement under the new formula, instead of 50 percent – a huge boost.
Supervisors argue the new formula is illegal because it was applied retroactively. It covered years already worked and already paid for. Increasing benefits retroactively constitutes an unconstitutional gift of public funds, the lawsuit claims. It also created an unfunded liability, violating the state constitution's prohibition on deficit spending.
Public employee unions counter that the pension agreement is a valid contract that workers have relied upon to make life decisions. It cannot be set aside. They note that both federal and state case law have been protective of public employee pension rights in the past.
The suit's argument is as novel as its subject is important. Like Orange County, the state of California and hundreds of local governments have granted retroactive pension benefits in recent years. All of them are potentially vulnerable to similar challenges. This lawsuit will be – and should be – closely watched by taxpayers and public employees alike.
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