“A public employee’s pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment. Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity,” (Gutierrez v. Board of Retirement, 72 Cal Rptr 2nd 837 (1998); Betts v. Board of Admin., 582P.2d 614 (Cal 1978)).
Orange County Supervisor John Moorlach on Friday July 20, 2007 proposed spending potentially millions of dollars in litigation costs to sue, the Association of Orange County Deputy Sheriff’s and the Orange County Employee’s Retirement System over the 2001 decision of the Orange County Board of Supervisors to increase the pension benefits for our Deputy Sheriffs.Â Moorlach claims, as though he is some magical predictor of things, that the five year old action is unconstitutional, never mind the fact that virtually every public employer of peace officers has taken the same action.Â
I find it hard to believe that with hundreds of jurisdictions in California taking the same action that no “taxpayer advocacy” group has thought of this wild-assed legal theory before.Â If the theory was so sound then why didn’t Moorlach bring it up in 2001 when it came before the Board of Supervisors?Â For that matter, why didn’t any of these great legal theorists suggest filing a request for an injunction to stop these increases from happening at the time?
John Moorlach is far more political opportunist than legal or constitutional genius. You can always pose a question to a number of attorneys and come up with multiple conflicting legal points of view.Â Heck, if that were not the case, there would be far less lawyers and lawsuits in this state.Â No matter what the legal question though one fact remains, the County of Orange negotiated in good faith an agreement with the AOCDS and granted an increase in pension benefits.Ã‚Â That decision was not unprecedented, and has happened many times in virtually every jurisdiction in the state.Â
It is unethical for the current Board, to now spend taxpayer funds on litigation to overturn their contractual agreement because new members of the Board believe the agreement to be unconstitutional.Â If there is some group out there that wants to raise the money and file a suit that’s fine; but the taxpayers of Orange County should not be left holding the bag for millions of dollars in legal fees.Â Further, if the County were to lose in this endeavor, the taxpayers could be on the hook for the legal fees incurred by the AOCDS and OCERS as well.
Moorlach’s theory is an interesting question of Constitutional law, but not one that should be determined at the expense of the Orange County taxpayers. Also, it is a long settled matter of law that A public employee’s pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment. Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity, (Gutierrez v. Board of Retirement, 72 Cal Rptr 2nd 837 (1998); Betts v. Board of Admin., 582P.2d 614 (Cal 1978)). If the Board of Supervisors accepts Moorlach’s proposal they would violate these well established precedents.Â
However, for the sake of discussion, let’s take a look at Moorlach’s primary argument.Â He claims that “the retroactive portion of the pension increase probably violates the California Constitution by violating of the debt limitation (Article XVI, Section 18).”
It is not unconstitutional for a retirement plan to have a portion of its forecasted future liabilities be unfunded at any point in time.Â Fluctuations in markets and investment returns, and assumption rates make it impossible for unfunded liability forecasts to be finite, and thus cannot be calculated as finite obligation of public funds.Â If you were to follow Moorlach’s theory to its logical conclusion, the County of Orange would have exceeded the debt limitation provided for by this section of the Constitution every time it failed to fully contribute its employer share of pension contributions in years where investment returns were high.
While there is indeed a liability, since it cannot be calculated to a finite amount, there is no way to determine whether the benefit increase actually exceeded the debt limitation.Â In reality, the pay as you go principle that Moorlach refers to allows the government to forecast their costs and encumber and invest only enough funds which, based upon a reasonable assumption rate, would raise the necessary amount of funds to cover their future costs.Â If the Moorlach feels that the County has not met the obligation of funding its liabilities he should propose that the County invest the appropriate amount of funding to meet that obligation.Â The only Constitutional violation here, if any, would be the County’s failure to appropriately contribute to its retirement system the necessary funds to meet its future payout obligation.
Sorry John, rescinding the increase in pension benefits is not the appropriate remedy here.Â Funding the obligation is.Â So rather than spend millions of dollars to try to have the benefits declared unconstitutional, spend that money to fund the future liabilities and what you see as a problem is solved.
Maybe, it’s just my so-called “pro union bias,” but I’m seeing a lot of political grandstanding and not a lot of legal foundation to his arguments. Finally, I believe the proper defendant in Moorlach’s proposed action would be the County of Orange as it is that entity that took the alleged unconstitutional action in the first place.Â I could be wrong, but I do not think the County of Orange can be both plaintiff and defendant in this matter.