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Back in 2001 the Orange County Board of Supervisors and the union representing Deputy Sheriffs – the Association of Orange County Deputy Sheriffs, or AOCDS – negotiated a labor contract that changed the retirement system for Deputy Sheriffs to what is commonly known as 3% at 50. In general terms this means that a Deputy can retire at age 50 or later with 3% of their pay for every year worked. For instance, if a Deputy had worked for 25 years he/she would be entitled to 3 x25 or 75% of their pay in retirement for the rest of their lives. The 3% at 50 was also made available to Sheriff Department management, District Attorney Investigators and some Probation Department officers. The move to 3% at 50 for public agency law enforcement personnel was sweeping the state about this time, though a few government entities successfully resisted.
In 2007 a new Orange County Board of Supervisors launched an effort to search for a way to reverse this 3% at 50 deal, stating the future cost was too much. Several law firms were contacted to explore the possibility of a suit to undo this 3% at 50 labor agreement, and according to media reports some of those lawyers told the County Supervisors that such a suit would not succeed. However, a firm was found to take the case, and a suit was filed in 2008 first in Orange County Superior Court, but then transferred to a Superior Court in Los Angeles.
The defendant in the lawsuit was originally the Orange County Employees Retirement System (OCERS), but the AOCDS was added before it went to trial. After hearing oral arguments the Court ruled against the County in February 2009, rejecting the argument that the pension was retroactive and thus unconstitutional, but giving the County the opportunity to strengthen its argument that the 3% at 50 agreement exceeded the California Constitutional limitations on the incurrence of debt.
The County’s law firm filed a 32 page amendment, with over 70 pages of attachments with the Court in late March seeking, as reported in the press, “to revive” its lawsuit. None the less in July, 2009 the Court ruled against the County, ending that lawsuit.
The Board of Supervisors authorized an appeal, and it was filed with the California Second District Court of Appeals. It sought a reversal of the lower Court’s ruling and a finding that the 3% at 50 agreement violated the State Constitution arguing that (1) it was applied to years of work by deputies prior to the agreement being struck, making it a retroactive payment for work already performed in violation of the Constitution, and (2) the result was the creation of a pension debt and that the California Constitution requires voter approval for the creation of debt by government entities and that did not happen in this case.
Filings with the Appeals Court in support of the County’s position were made by the Fullerton Association of Concerned Taxpayers, the California Foundation for Fiscal Responsibility and the Center for Constitutional Jurisprudence. Filing documents with the Court in support of the OCERS and AOCDS was an organization of state and local public employees and the California Public Employees‘ Retirement System (CalPERS).
The California Second District Court of Appeals heard the case during the week of January 17, 2011, and as reported on this blog on January 26 ruled against the county in a 29 page written decision. If you are a public policy wonk, you can read the entire January 26, 2011 Court of appeals decision by going to the Court’s web site at: http://www.courtinfo.ca.gov/courts/courtsofappeal/2ndDistrict/
That ruling included an award of legal costs to the OCERS and AOCDS to be paid by the County. The O-Juice blog post of January 26 repored that the county had incurred legal costs of $ 2.264 million and the AOCDS spokesperson was quoted in the press recently as stating they had spent a like amount to that of the County. At this writing we do not have a hint of the costs incurred by OCERS but a grand total so far in excess of $4.5 million for all parties seems likely.
So, the County has incurred $ 2.264 million in legal costs on this case and is likely on the hook for a similar amount, or more, to be paid to AOCDS and OCERS. Unless that is, the County chooses to appeal this decision by filing an appeal with the California Supreme Court and wins. Presumably the County’s own legal costs would rise with such an appeal as there would be legal costs to handle the case before the Supreme Court, but the County would be off the hook for AOCDS and OCERS legal costs if the County won. If however the County lost, then the County would not only incur its own direct and increased legal costs, it would then have to pay all the (increased) legal costs of AOCDS and OCERS.
One Supervisor has reported in his weekly newsletter that the Supervisors will go into Executive (closed) Session on February 8 to decide whether or not to appeal. Supervisor Moorlach has been quoted in the press as favoring an appeal to the State Supreme Court, but the other Supervisors have been quiet on the subject.
So the question before the Supervisors, given this rather colorful history of the sequence of events and the several millions of dollars in legal fees s far, is whether to continue the battle or fold ‘em. Recently Board Chairman Bill Campbell stated his goals for 2011, one of which is “Take appropriate action on the AOCDS/OCERS retroactive pension lawsuit”. Perhaps you have a well reasoned opinion on what “appropriate action” should be at this point in time that you would like to communicate to your Supervisor. Here is a list of them and their office phone number:
Janet Nguyen, Supervisor, First District 714-834-3110
John Moorlach, Supervisor, Second District 714-834-3220
Bill Campbell, Supervisor, Third District 714-834-3330
Shawn Nelson, Supervisor, Fourth District 714-834-3440
Patricia Bates, Supervisor, Fifth District 714-834-3550
As much as I hate it when you see government agencies wasting tax payers dollars (ie paying John Williams PAPG salary when he is out of the state working for the SOCCCD – not the County), I think Moorlach is right in pursuing this. To me, it was clearly a gift of tax payer funds giving the “retroactive” portion of their retirement. This is the only agency in the County that got this benefit. When other agencies went from 2% at 55 to 2.7%, their new rate was not retroactive to their date of hire. They will receive 2% for how many years they accrued that, then 2.7% for how many years they had that. Not 2.7% for the whole length of their employment. Even worse, these Sheriff’s Deputies who got this retroactive pension did not put a penny of their own money towards their retirement. Will the County win this argument – probably not. Is it worth spending a couple million dollars when you can possible save $150+ million dollars? Absolutely.
It’s onlymoney.
While we know who was in office at the time of this 3%@50 pension spike, a 50% increase, I will do some research to establish which of the five Republicans voted for it.
I am angry to recognize that Jim Silva and Todd Spitzer were on the BOS when it went into effect. The other three are long gone from active public service.
Lou Correa was involved at the state level as a member of the Assembly. He was a champion of the Bill which set this all in motion.
Agree. It should continue to be pursued.
Very well written post, btw. Wish we’d see more of this on the OJ.
I read the Appeals Court decision. Whew! The Supervisors gave away the store and now seek to escape that deal. This statement in the Appeals Court decision really resonates – “imprudence is not unconstitutional”. After reading that decision, were it my money I would say do not appeal. Recognizing that it is not my money (at least 99.9% of it), the politics and egos involved, my guess is that a majority of the Supervisors will vote to appeal. I predict another loss if they do.
Prudent,
To be clear – the former Board gave away the store, and the current Board is doing what it can to recoup what I think is an illegal gift of public funds. Since the Board has come this far, and it has nothing to lose (it already is on the hook for the retroactive benefits) and everything to gain (invalidating the benefits), why not appeal to the Supreme Court to get a final ruling and end the debate? If the Supreme Court rules in favor of the union, then it will save other public agencies years and significant resources fighting similar suits, and if it rules in favor of the Board, it will have a massive impact on reducing the huge unfunded liabilities that are crippling our nation.
Suing yourself is always going to be problematical.
Larry G – my post got so long that I purposely left out the early chronological history that it was Correa who authored the State legislation that gave county Boards of Supervisors the option of 3% at 50 among a smorgasboard of pension alternatives they could chose from. Of course, the union imediately seized on that option as a netgotiating position, and the rest is history. Even though Correa authored that legislation, it was the Supervisors, not him, that agreed to implement it in OC. The Appeals Court decision says it was a unanimous vote of the Supervisors on Dec. 4, 2001. Another curse of “local control”?
Sounds like the PEPS got good break on this one.
So logicially, the next step should be to stop the bleeding and STOP (if possible) this benefit to future employees. If it can not be, sacrifice public safety and hire NO MORE SHERRIFS. Cancel the agreements with Mission Viejo and San Clemente NOW. fewer officers means smaller pensions.
The AOCDS will simply force the outsourcing of jobs. a good chunk of what they do could be handled privately.
HOW MANY EMPLOYEES ARE WE TALKING ABOUT? and HOW MUCH. IF WE STOPPED 1/1/11? Many of these guys are in poor health and the historic bad habits of law enforcement in genreral (FAT, LAZY, STUPID)….just kidding. Seriously, what is the cost to KILL THE AGREEMENT MOVING FORWARD, then it’s like a few guys struck gold. and we move on
The only real option is to work on a different agreement, if not you have got to live up to what you have on paper. Continuing the lawsuit is just a waste of money and time. It may play well to some voters who think we should not pay our public employees decent pensions, but this is not a way to cut costs. Lots of politically popular noise without any results.
I would think, if they took a less confrontational approach a cost saving modification that all parties could agree to could be found.
Over,
I agree with Non-Greenster – very well-written and unbiased look at the history of the pension debacle. However, I would say you have made one big error and that is with respect to costs. As I read the ruling, it only awarded the parties their costs on appeal. That means they will recover filing costs, service costs, etc. which should amount to only a few thousand dollars. As I did not see any discussion of attorneys’ fees (the majority of the millions the parties have spent), the union will not recover any attorneys’ fees, but only their filing costs, etc. So, while the Board is on the hook for its own attorneys’ fees, it will not have to pay the union’s attorneys’ fees as well. Even if the Supreme Court takes the matter up and the Board loses, it will only have to pay the costs (filing fees, etc.) there, and not the attorneys’ fees.
Newbie, thanks for your kind words about objectivity-I tried really hard for that. I was told that the term at the end of the court decision “respondants are awarded their costs on appeal” meant that all their legal costs to date are awarded to them, to be paid by the county. If that is not the case, then you are right that I have overstated the costs to be reimbursed. Setting those costs aside, per the OJuice blog post of Jan 26 the county itself has incurred legal fees of $ 2.264 million so far and an appeal to the Supremes would add some unkown additional costs. Of course, should the County win few would question the investment, but if the County loses, then there will be those who criticize.
Over,
You are correct that there will always be critics, regardless of the Board’s decision. That’s why we elect them – to make difficult choices. If we don’t like it, we try to get them out of office. Unfortunately, we are often still on the hook for the poor choices they make. That’s why I support the Board here – they are trying to reverse a very bad decision by a prior Board. Unfortunately, good attorneys are expensive but to me, it’s worth the cost given the tens of millions we are on the hook for. On the fees issue, I wasn’t criticizing you. I suspect that you aren’t an attorney and you may have received erroneous information. Unless there was an award of attorneys’ fees by the trial court that wasn’t appealed (which I highly doubt), since there is no mention of an appeal of an award of attorneys’ fees, the only thing the union will be recovering are the basic fees I mentioned in my earlier post. Don’t let my correction dissuade you – it was a well-written and bias free piece, which is a rarity on here.
Newbie,
You’re so right – “If we don’t like it, we try to get them out of office.”
The obvious reason for the suit is to focus the voters attention on the court decision and not on the merits of the case which they have been advised are zilch. The courts avoid these sorts of disputes (collective bargaining) like the plague – otherwise everyone will make bad deals just to get them settled and then turn to the courts to get them off the hook.
As crime is down 20% the county should propose to layoff 20% of the sheriffs and that will bring them to the bargaining table where pension problems can be resolved – a 20% RIF will also cut into that unfunded pension liability.
Larry,
I’m all for creative solutions to big problems.
All – just found an interesting related article in the San Diego Union-Tribune newspaper, if you are interested in tracking it down and reading it (the link did not seem to copy well):
Pension suit on life support
SAN DIEGO — A lawsuit championed by former San Diego City Attorney Michael Aguirre that sought to eliminate $900 million in pension benefits granted by the city is clinging to life after an appeals court ruling in a separate but similar case in Orange County. One of the central legal arguments behind Aguirre’s case is that San Diego violated the state’s debt-limit laws by awarding retroactive pension benefits to its public employees in 1996 and 2002 without getting approval from voters. The case has been in limbo for four years since a Superior Court judge ruled against Aguirre and upheld the benefits. more
by Craig Gustafson, San Diego Union-Tribune, 2011-02-01
Well, we declared bankruptcy once and came out of it ok …
HOW MUCH DO THE PENSIONS COST OC?
Over 20 Years?
Over 15 Years?
Over 10 Years?
Over 5 Years?
OVER 18 MONTHS??????
You et the idea. I am afraid this is all academic. Is the cost crippling as the lawsuit proponents say? What is the breakdown?
Also, the cussrent Supervisors need to remember, taht the same folks that elected them, voted for the ones that approved this.
Without a FAIR and HONEST evaluation of the impact this is all just politics.