Four Marin labor groups have appealed a state appeals court decision that some say could radically alter the ability to reduce the retirement benefits of public employees who are still on the job.
The plaintiffs — the Marin Association of Public Employees, known as MAPE; the Marin County Management Employees Association; Service Employees International Union 1021; and the Marin County Fire Department Firefighters’ Association — have requested that the state Supreme Court review a decision issued in August by the 1st District Court of Appeal in San Francisco.
In the decision, the appellate court upheld the Marin County Employees’ Retirement Association’s interpretation of two 2012 state amendments that created new rules for how county retirement boards are permitted to calculate their current members’ retirement allowances.
“If the Supreme Court were to uphold the rationale of the Court of Appeal, I think it would be a significant break in what everybody has understood the vested right law to be,” said Gregg Adam, one of the plaintiffs’ attorneys.
Jody Morales of Lucas Valley, founder of Marin’s Citizens for Sustainable Pension Plans, said, “The ultimate decision could be among the most important decisions made by the court this decade or even for this generation given the mind-boggling expansion of pension debt.”
The Marin County Employees’ Retirement Association has an unfunded pension liability of $402.8 million; the county of Marin’s share amounts to $243.6 million. The appellate court noted in its decision that in May 2011 the Congressional Budget Office estimated California’s unfunded liabilities at between $2 trillion and $3 trillion.
2012 WATERSHED
The board of the Marin County Employees’ Retirement Association reacted to the California Public Employees’ Pension Reform Act and AB 197, both of which were signed into law in September 2012, by excluding standby pay, administrative response pay, callback pay and cash payments for waiving health insurance from the calculation of members’ final compensation.
The unions then sued, asserting that the value of these benefits had been a factor in determining the wage and benefit packages offered to Marin County Employees’ Retirement Association members through collective bargaining and in some instances had led to employees accepting lower wages or other benefits.
Jeff Wickman, retirement administrator of the Marin County Employees’ Retirement Association, said, “Our argument was that the board of retirement’s action was appropriate and constitutionally supported following implementation of PEPRA and AB 197.”
The state Attorney General’s Office also joined the case as a respondent together with the Marin County Employees’ Retirement Association. Its legal argument was slightly different, however. It asserted that the association never should have been using the extra payments to calculate pensions in the first place.
“The Court of Appeal could have gone with either MCERA’s position or the attorney general’s position,” Adam said. “But it chose to go for neither of those.”
‘REASONABLE’ PENSION
In its ruling, the Court of Appeal wrote, “While a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension — not an immutable entitlement to the most optimal formula of calculating the pension. And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a ‘reasonable’ pension, there is no constitutional violation.”
Adam said, “The ruling by the Court of Appeal in the Marin case is 180 degrees at odds with Supreme Court rulings going back at least 60 years.”
Adam said the Supreme Court has said since the 1950s that any negative modifications to public employee pensions need to be offset by comparable advantages.
“The Court of Appeal said, we disagree, we think everybody has read the Supreme Court case law wrong, and we think that employers can reduce pensions with very minimal limitations on that,” Adam said. “The main limitation that the Court of Appeal articulated was that you couldn’t destroy the pension.”
The Supreme Court has 60 days to decide whether to review the case.
Roland Katz, MAPE’s executive director, said the union is asking the Supreme Court to “depublish” the appellate ruling, meaning it cannot be used as a precedent to decide other cases.