US Supreme Court Declines To Hear Prop B Pension Case
Monday, March 18, 2019
PHOTO BY KATIE ORR
Above: San Diego Mayor Jerry Sanders and supporters announce their pension reform measure on April 5, 2011.
GUEST: Andrew Bowen, metro reporter, KPBS News
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The United States Supreme Court announced Monday it is denying San Diego’s request to review a longstanding legal fight over the city’s 2012 pension reform measure, Proposition B.
Last August the California Supreme Court ruled the city had violated state labor laws when it placed Prop B on the ballot without first negotiating with unions representing city employees. Prop B was a citizens’ initiative that eliminated guaranteed pensions for most newly hired city workers and instead offered them 401(k)-style retirement accounts. It passed with the approval of 66 percent of city voters.
The justices found then-Mayor Jerry Sanders had ignored his responsibility as the city’s chief labor negotiator to meet and confer with city employee unions over changes to their terms of employment. While Prop B was not officially sponsored by the city of San Diego, Sanders campaigned heavily for it, at times using city resources. He also admitted in a magazine interview that he avoided labor negotiations so he could get a stricter pension reform on the ballot.
The city sought review from the US Supreme Court, arguing the state high court’s ruling ignored Sanders’ First Amendment free speech rights. It has long argued Sanders spoke out in favor of Prop B as a private citizen.
State Supreme Court Chief Justice Tani Cantil-Sakauye was unconvinced, and said during oral arguments in May 2018 that Sanders was still required to negotiate with the unions in good faith.
“He doesn’t get to pick and choose which parts of his title and responsibilities he gets to disregard,” Cantil-Sakauye said. “‘I’m mayor, but — blink blink — I’m acting as a private citizen.’ It just seems to me that he also has other roles that he failed to acknowledge.”
RELATED: More San Diego Employees Are Quitting Since ‘Prop B’ Pension Reform
Carl DeMaio, a former City Council member and one of the chief proponents of Prop B, said he was disappointed but not surprised by US Supreme Court’s decision give that it grants review to very few cases
“Prop B Pension Reform is a Citizens Initiative that is protected under the California Constitution and we continue to assert all of the legal remedies afforded to prevent it from being illegally overturned,” DeMaio said in a statement Monday morning.
While the state Supreme Court found the city’s actions violated state law, it left it up to the state’s 4th District Court of Appeal to determine how to rectify that violation. Oral arguments in that case took place March 11, and the panel of three judges has 90 days to issue a decision.
The unions have argued the Court of Appeal should overturn Prop B and validate a 2015 ruling by the Public Employment Relations Board, a quasi-judicial administrative agency that enforces certain labor laws. PERB had ordered the city to incorporate employees hired after Prop B into the city’s pension program.
Lawyers for the city and Prop B proponents asked the Court of Appeal for a more lenient remedy to the city’s violation, such as a fine. Any decision from the Court of Appeal can again be appealed to the state Supreme Court.
It is unclear how much it would cost the city if it were ordered to create pensions for employees hired since Prop B passed. Much of the cost would depend on whether the city could use the funds accrued in the employees’ 401(k) accounts. The city may also be ordered to foot the unions’ legal bills, which have been racking up since the measure was circulated in 2011. https://www.kpbs.org/news/2019/mar/15/san-diego-decisions-prop-b-pension-supreme-court/
Supreme Court rules San Diego skipped key legal step in taking pension reform to voters
The California Supreme Court ruled on Thursday that San Diego’s six-year-old pension cutbacks were not legally placed on the ballot because city officials failed to negotiate with labor unions before pursuing the measure.
The California Supreme Court ruled on Thursday that San Diego’s six-year-old pension cutbacks were not legally placed on the ballot because city officials failed to negotiate with labor unions before pursuing the measure.
The ruling, which could cost the city millions, overturned an appeals court ruling last year that had upheld the cuts.
The Supreme Court ordered the appeals court to take the case back and evaluate the state labor board’s conclusion that 4,000 employees hired since pensions were eliminated must receive compensation that would make them financially whole. While the unanimous ruling stopped short of reversing the cuts, it essentially ordered the appeals court to invalidate the ballot measure that imposed those cuts.
The ruling directs the appeals court to enact “an appropriate judicial remedy” for the city’s failure to follow all of the legally required steps before placing the measure on the ballot.
The only way to do that, attorneys for the city’s labor unions said, would be to invalidate the ballot measure and nullify the pension cuts.The ruling vindicates claims by city labor unions that then-Mayor Jerry Sanders needed to engage in labor negotiations before pushing the Proposition B pension measure onto the ballot in 2012.
The measure, which was approved by more than 65 percent of city voters, replaced guaranteed pensions with 401(k)-style retirement plans for all newly hired city employees except police officers.
Sanders maintained he supported the measure only as a citizen, not as mayor, and therefore negotiations with unions weren’t required.
The Supreme Court disagreed in its ruling, concluding Sanders was obligated to meet with the unions before placing the measure on the ballot because he used his power and influence as mayor to support the measure.
“Sanders supported the signature-gathering campaign,” the court said in the ruling, which was written by Justice Carol Corrigan. “He touted its importance in interviews, in media statements, and at speaking appearances.”
Sanders said by phone on Thursday that his actions were based on legal advice he received, and that he still doesn’t believe he acted improperly. But Sanders also said he should have handled things differently.
“If I had it to do all over again — and if I had better advice — we probably would have done meet and confer (labor negotiations),” he said.
San Diego is the only city in California to discontinue pensions for new hires, so the ruling could have an impact across the state as other city and county governments consider pension cuts and how they can be legally enacted.
Supporters of Proposition B have said they may place a similar measure on a future ballot if the cuts are eventually nullified.
In Thursday’s ruling, the Supreme Court emphasized that it wasn’t taking a position on pension cuts.
“We are not called upon to decide, and express no opinion, on the merits of pension reform or any particular pension reform policy,” the ruling said.
The ruling reinstates a 2015 decision by the state labor board that also concluded the city was legally required to conduct labor negotiations before placing Proposition B on the ballot.
In that decision, the labor board ordered San Diego to make employees hired since 2012 whole by compensating them for the loss of pensions and paying them interest penalties of 7 percent. Estimates of how much that would cost the city have ranged from $20 million to $100 million, depending on a variety of factors.
The labor board, formally known as the Public Employment Relations Board, couldn’t invalidate the ballot measure because that power is reserved for state courts.
When the appeals court overturned that decision last year and ruled the city had acted legally when placing the pension cuts on the ballot, the appellate judges didn’t evaluate the proposal to make employees whole because it seemed unnecessary.
The Supreme Court, however, ordered the appellate court on Thursday to evaluate the proposal to make employees whole and to take judicial steps to reverse Proposition B because the city skipped a key legal step when placing it on the ballot.
Supporters of Proposition B on Thursday issued news releases saying that the Supreme Court’s ruling didn’t invalidate the measure or reverse the pension cuts.
Ann Smith, an attorney for the Municipal Employees Association labor union, said by phone on Thursday that those supporters are misreading the ruling.
“They’re out to lunch,” she said. “The Supreme Court is telling the appeals court you should add the judicial remedy of invalidation because that’s the only outcome that’s consistent with the Supreme Court’s binding conclusion that the city violated the law.”
Courts, however, have typically been reluctant to nullify ballot measures that are citizen’s initiatives.
Mayor Kevin Faulconer issued a new release on Thursday afternoon noting that the ruling leaves Proposition B in place until the appeals court acts.
“San Diego pension reform remains the law of the land and today’s Supreme Court decision keeps Proposition B in full force and effect,” the mayor said. “My administration will work closely with the City Attorney’s Office on the direction provided by the Supreme Court.”
A spokesman for City Attorney Mara Elliott said she wouldn’t be commenting on the ruling on Thursday.
Former Councilman Carl DeMaio, who helped write Proposition B, said he was pleased the Supreme Court didn’t overturn the city’s pension cuts, but added that still might occur.
“Taxpayers must be very concerned by what may happen next,” he said in a news release. “Specifically we are concerned that the Supreme Court ruling opens the door for the lower court to consider a yet-undefined ‘remedy’ for the so-called violation of the city of San Diego’s duty to meet and confer on pension changes before implementing them.”
DeMaio said the remedy could be as small as a fine for not meeting and conferring, or as big as overturning part or all of Proposition B. DeMaio vowed to appeal any remedy prescribed by the appeals court to the Supreme Court.
Based on the labor board proposal that the city make employees whole, the actuary for the city’s pension system estimated in late 2015 that it would cost the city $20.1 million for 1,600 employees hired without pensions at that point. But the number of employees hired without pensions has increased to more than 4,000 since then, more than doubling the city’s potential cost.
In addition, new demographic studies showing the city had been underestimating life expectancies for its retirees prompted city pension officials to significantly increase the projected cost of pensions in 2016.
The labor board recommendation, however, said the city could count against its costs the many millions it has contributed to 401(k)-style retirement plans for those workers.
Because of the particularly strong performance of the stock market since 2012, those retirement plans are worth more than expected. That could make the city’s costs relatively minimal.
Employees would also be required to contribute to pensions created retroactively for them, further reducing the city’s costs.
The state labor board ruling didn’t recommend any changes for a separate element of Proposition B, a five-year freeze on pay raises for city employees that expired June 30. The pay freeze was not part of the labor board ruling because the city’s labor unions agreed to it during negotiations with then-Mayor Bob Filner in 2013.