Notes From Babel

Taxpayer victory in state employees pension lawsuit

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The same week the Second District ruled in favor of public sector unions in Orange County v. AOCDS, the Third District ruled against them in California Statewide Law Enforcement Ass’n. v. California Department of Personnel Administration on January 26 (opinion available here).  You can find my write-up on the Orange County case here.  (Full opinion here.)  While the two cases come to opposite conclusions, it is not for any disagreement about the law.  While the Orange County case raised important questions under the California Constitution, the CSLEA case involved the determination of whether the union’s retroactive pay increase had properly been put before and ratified by the California Legislature as required by statute.  Because the CSLEA court answered that question in the negative, the union lost.  While this may mean a savings for the state, this is a relatively unusual case that will not likely have wide application for other challenges to union deals.  Thus, all eyes are still on Orange County’s appeal to the California Supreme Court.

However, it is still interesting to observe the markedly different approach the Third District took toward the state’s state budget issues.  Note the gravity with which the court regards the case before it:

Many millions of dollars are at stake in this case.  At issue is the process by which a public employee labor union and the Governor negotiate benefits for state employees and then present their collective bargaining agreement to the Legislature for approval and funding.  Such agreements, which have been under the public’s radar in the past, are now coming to light due to the massive budget deficit the State is facing.

Compare this with the Second District’s aloof treatment in Orange County v. AOCDS:

In 2008, the County of Orange (Orange County or the County) sued the board of the County’s retirement plan, claiming that an enhanced retirement formula for prior years of service adopted in 2001 by the County Board of Supervisors violated the California Constitution. The County now appeals from the trial court’s grant of motions for judgment on the pleadings and entry of judgment in favor of the Association of Orange County Deputy Sheriffs and the Board of Retirement of the Orange County Employees’ Retirement System. We conclude that the past service portion of the enhanced retirement formula does not violate the Constitution, and we affirm.

The facts in CSLEA v. CDPA were these:  The CSLEA represents State Bargaining Unit 7, comprised of approximately 7,000 state employees.  Half of that unit is made up of sworn peace officers.  The other half are DMV officers and regulatory agents who inspect and investigate auto dealerships, cosmetologists, hair salons, etc.  California collective bargaining law provides for an enhanced pension benefits for what’s called “safety members”—i.e., law enforcement officers whose jobs carry a risk of injury.  Peace officers, firefighters, and correctional officers are considered “safety members” under California law.  See, e.g., Cal. Gov. Code §§ 20390(a), 20398(a)(10), 20403.  Other state employees are “miscellaneous members” who are not entitled to the same generous retirement formula reserved for safety members.  Obviously, then, miscellaneous members jockey for safety member status. 

In March 2002, they were successful.  At that time, CSLEA prevailed upon the DPA to reclassify the employees of Unit 7 from miscellaneous member status to safety member status, thus increasing their pension benefits.  The parties apparently agreed that the members’ status was to be made retroactive to their prior years of work—causing the state to immediately incur a “present value cost” liability of more than $148 million.  However, the memorandum of understanding actually presented to the Legislature for approval did not indicate this retroactivity agreement.  On that basis, the court held “we cannot say that the Legislature approved the unwritten agreement to bestow the safety member benefits retroactively.” 

California’s statewide unfunded public employee liability is estimated between $400 to 500 billion.  According to the American Enterprise Institute, those pensions are approximately 48% funded.  At Cal Watchdog, Larry Ebenstein of the California Center for Public Policy in Santa Barbara writes:

There are already more than 12,000 retired public employees in California with annual pensions of $100,000 or more. This number will increase substantially in the years ahead. Looking forward 20 years, California will have 2 million retired public employees drawing average pensions of $50,000 — $100 billion per year in pension costs when the entire state budget is now merely $85 billion.

. . . .

President Franklin Roosevelt was clear that there is a great distinction between public and private sector unions: “Meticulous attention should be paid to the special relations and obligations of public servants to the public itself and to the government,” he said in 1937. “The process of collective bargaining, as usually understood, cannot be transplanted into the public service.”

George Meany, the first and longtime president of the AFL-CIO, had the same view.

Public sector unions have negotiated approximately $8 billion in unconstitutional retroactive benefits.  These two lawsuits represent a handful of our representatives paying “meticulous attention” to the improper bargains public employees are awarded. 

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Written by Tim Kowal

February 15, 2011 at 11:00 pm

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