S.F. loses state Supreme Court ruling on pension cuts

The state Supreme Court on Wednesday allowed thousands of San Francisco city employees and retirees to regain increases in future pensions that voters had sought to eliminate.

A lower-court ruling had restored the increases for employees who retired after November 1996 and for future retirees, and the court on Wednesday denied the city’s appeal. The court also denied an appeal by a lawyer for the workers, who had wanted a ruling that eliminated the cutbacks for earlier retirees.

The lawyer said the ruling as it stands would help about 23,000 employees who have retired since 1996.

The reductions were part of Proposition C, a November 2011 ballot measure sponsored by Mayor Ed Lee and backed by labor unions. The main part of the measure, unaffected by the court case, required city employees to contribute 7.5 percent of their salaries to the pension fund, a percentage that will rise when the fund is dwindling and drop when it is thriving.

The provision challenged by retirees was a partial rollback of cost-of-living increases that city voters had first approved in November 1996 and enhanced in 2002 and 2006. Adding to the annual inflation increases pensioners were already allowed to receive, the changes gave them an additional increase of up to 3.5 percent in years when the retirement fund’s earnings were higher than anticipated.

Prop. C would have limited those added cost-of-living increases by allowing them only when the retirement fund was considered “fully funded.” The state’s First District Court of Appeal overturned that cutback in March, saying it violated the vested rights of employees who retired after November 1996.

“Upon accepting public employment, one acquires a vested right to a pension based on the system then in effect, and to additional pension benefits conferred during his or her subsequent employment,” Justice Henry Needham said in the 3-0 ruling. But he said the city could impose the restrictions on pensions for those who retired before November 1996, when the increases were first approved.

City Attorney Dennis Herrera’s office appealed, arguing that Prop. C merely clarified the previous law and did not violate retirees’ vested rights. The high court unanimously denied review of both sides’ appeals Wednesday.

The case is Protect Our Benefits vs. San Francisco, S226262.

Bob Egelko is a San Francisco Chronicle staff writer. E-mail: begelko@sfchronicle.com Twitter: @egelko

http://www.sfgate.com/bayarea/article/S-F-loses-state-Supreme-Court-ruling-on-pension-6333701.php