Corona POA President Jason Perez Defeats CalPERS Board President

CalPERS has reported that Corona Police Officers Association President Jason Perez defeated incumbent CalPERS Board of Administration President Priya Mathur with 56.78% of the vote to her 43.22%.  His term will begin in January.  Perez ran on a platform of maximizing investment returns and putting an end to using CalPERS investments to advance unrelated social and political causes.

The Board of Administration is a 13-member board of elected, appointed, and ex-officio officials charged with overseeing and directing the management of CalPERS.  The executive leadership of the Board is elected from among its members. 

CalPERS Investment Return Exceeds Forecast For Second Straight Year

CalPERS reported an impressive 8.6% return on its investments over the last fiscal year.  That's on top of the 11.2% CalPERS reported for fiscal year 2016-17.  CalPERS investment return brings the total fund up to 71% funded, meaning CalPERS has that percentage of the funds it needs to pay out its obligations.  CalPERS recently reduced its predicted returns, triggering higher contributions into the system.  Continued successful investment returns is good news for California labor unions and public employers in the CalPERS system.

Chuck Reed's Pension Attack Fails to Make the Ballot for a Third Time

Earlier today, former San Jose Mayor Chuck Reed admitted defeat for his third attempt to attack public employees' retirement security.  Accordingly to the Sacramento Bee, the move appears to be motivated by poor polling for the initiative and Reed's inability to raise enough money to pay people to gather signatures in support of the measure.

Reed's campaign for a statewide attack on retirement security follows his failed attempt to attack pensions in San Jose.  Despite his repeated failures of this issue, Reed said he and his partners planned to bring the issue up again in 2018.  He said in a press release that he planned to "re-file at least one of our pension reform measures later this year for the November 2018 ballot."

Reed is joined in his effort by Pacific Grove Mayor Bill Kampe and San Diego politician Carl DeMaio.  Pacific Grove's attack on pensions was ruled unconstitutional in 2013.

Chuck Reed Tries New Tactic in Pension Assault

Chuck Reed announced a new strategy to attack pensions in California today.  The text of new proposal has several features designed to take away employees retirement benefits.

It would abolish pensions for employees hired after January 1, 2019 and replace them with a "defined-contribution" system unless changes to benefits are approved in an election.  In a defined-contribution system, employees have to pay in a fixed amount with no guarantee of what their retirement income would be.  As a result, this approach shifts the risk and could result in thousands of public employees unable to retire.

The proposal is not limited to retirement benefits.  It provides, "Voters have the right to use the power of initiative or referendum... to determine the amount of and manner in which compensation and retirement benefits are provided to employees of a government employer."  As a result, the measure could be read to allow voter initiatives to eliminate or change MOUs, severely limiting collective bargaining in California.

The proposal also seeks to prevent the Public Employment Relations Board from hearing unfair practice cases involving ballot measures to strip employees of bargained-for compensation.

Illinois Supreme Court: Pensions Protected By State Constitution

In Kanerva v. Weems (July 3, 2014), the Illinois Supreme Court ruled health-insurances subsidies for retired state workers are protected under the Illinois Constitution. The ruling poses a challenge to Illinois’ recent pension reform legislation and may force the State to consider raising revenue rather than cutting benefits.

Recently, the State attempted to reform the pension system by imposing healthcare insurance premiums on its retired workers, reducing cost-of-living increases for pensions, raising retirement ages, and limiting the salaries on which pensions are based. Retirees challenged a recent amendment to the State Employees Group Insurance Act, arguing it violated pension protection clause of the Illinois Constitution. The high court agreed, finding the pension protection clause applies to an Illinois public employer’s obligation to contribute to the cost of health care benefits for employees covered by one of the state retirement systems.

In a similar case, David E. Mastagni and Isaac S. Stevens, obtained a decision in the Los Angeles County Superior Court for the Los Angeles City Attorneys’ Association (LACAA). They argued the City of Los Angeles’ freeze ordinance, which capped retiree medical premiums at $1,190 with no increases, unconstitutionally impaired a contractual obligation to LACAA’s members because a maximum medical plan premium subsidy is a vested right. The court agreed, finding the freeze ordinance was an impairment of a vested right to a substantial or reasonable benefit and issued a writ of mandate directing the City to compute and provide the health insurance premium to LACAA’s members without regard to the City’s freeze ordinance.

9th Circuit: Pooling Premiums Not a Vested Contract Right

On February 13, 2014, the Ninth Circuit issued an opinion in Retired Employees Association of Orange County, Inc. v. County of Orange (2/13/2014) 9th Cir. 12-56706. The Retired Employees Association of Orange County (“REAOC”) filed a lawsuit against the County of Orange when the County decided to stop pooling retired and active employee health insurance premiums.

From 1985 to 2007, the County pooled health insurance premium rates for retired and active employees. Pooling the premiums balanced active and retiree rates and helped lower premium costs for retirees.  But on January 1, 2008, the County and various labor unions reached an agreement to reform the County’s health care program. The agreement split the insurance rate pool so active employee health benefit premiums were separate from those of retired employees.  REAOC sued, arguing the County’s longstanding practice of pooling premiums, and the County’s representations to employees regarding that practice, created an implied contract right for employees who retired prior to January 1, 2008.

California law states where a County intended to create a contractual obligation by resolution or ordinance, the contract may include implied terms derived from experience and practice. The California Supreme Court stated vested health benefits can be implied under certain circumstances from a county ordinance or resolution.

REAOC contended the County established a vested right for retirees to have their health benefit premiums pooled in the future by adopting the pooling scheme year after year. However, the Ninth Circuit held the resolutions supported enrollment in County health plans at a specific rate for a given year, but did not create a vested right to have benefit premiums pooled in the future. In other words, the Board’s approval of health premium pooling in years prior, by itself, did not create an ongoing contractual right.

CalPERS Reports Huge Investment Gains

CalPERS posted another huge increase in its investments which grew by 16.2% in 2013.  That's more than the 12.5% CalPERS reported in July 2013 and the 13.3%it earned in 2012.  CalPERS has continued to grow its assets since 2011 when a 20.7% return prompted CalPERS to declare "We are back."  According the the Sacramento Bee, "the latest investment performance by CalPERS last year was the best since 2003."

Court: Key Parts of San Jose Measure B Unconsitutional

On December 20, 2013, the Santa Clara County Superior Court overturned the heart of Measure B, San Jose's attack on employees' pensions.  In doing so, the court followed the Monterey and Los Angeles superior court which have overturned similar attacks on employees' vested rights.

The court overturned part of Measure B that shifted financial responsibility for unfunded liabilities from the City to employees.  That section would have dramatically increased employees' contributions into the system.  The court found that employees had a vested right to have the City pay that portion.  As a result, Measure B unconstitutionally impaired their vested rights.

The court also overturned a provision that allowed the City council to suspend retirement Cost-Of-Living-Adjustments (COLAs) by "declaring a fiscal emergency."  COLAs are not always vested rights, but the court found that retirees in this system had a vested right to COLAs.  The court overturned this section, noting it is not enough for a city council to declare an emergency.  Instead, there has to really be an emergency.  Further, an impairment to a vested right on emergency grounds has to be temporary.  Since this section did not require a real emergency and impaired vested rights in a permanent way, the court ruled it was unconstitutional.

The court upheld other portions of Measure B related to disability retirement, supplemental payments to retirees, retiree medical, and wage cuts.  The court also found "that the Measure B sections at issue in this case can proceed as to new employees."

Trust Counsel: California Pensions More Secure Than Detroit's

After a Michigan bankruptcy judge opened the door to cutting public employees' pensions as part of the City of Detroit's bankruptcy, some observers suggested the ruling opens the door to similar tactics in California. But as Harvey Leiderman, the well-regarded trust counsel to CalPERS and other retirement systems, recently explained, California's pensions are very different from - and more secure than - Detroit's.

Leiderman explained Michigan's pension system hinges on a contractual relationship between two groups: retirees and employers, making it more vulnerable to impairment in bankruptcy.  That's because bankruptcy courts (unlike employers themselves) have special powers to impair contracts.  California's system, however, has three groups: retirees, employers, and pension trusts, such as CalPERS.

Leiderman explains that California's system includes legal duties between employers and pensions trusts on the one hand, and pension trusts and retirees on the other.  These duties are the product of state laws, not contracts.  He used this chart to illustrate the relationship:

Thus, even without contracts, California public employers have a duty to pay CalPERS and CalPERS has a duty to pay retirees.  Read the full article here.

Poll Shows Californians Oppose Reed Initiative

A recently survey conducted December 5-9, 2013 shows Californians coming out against the Reed Initiative by a margin of 49% to 35%.  The poll shows an overwhelming majority of Californians oppose efforts to eliminate public servants' pensions.  Specifically, the poll noted that 54% of California strongly oppose "Eliminating Police, Firefighters, and Other Public Employees Vested Pension Benefits."  Read the report on the new poll here.

British Firefighters Poised to Strike Over Retirement Age Increase

Firefighters in England and Wales announced today they plan a 4-hour strike to protest a proposal to raise their retirement age to 60 because raising the retirement age jeopardizes public safety.  The firefighters' labor union, the Fire Brigades Union, explained "It is ludicrous to expect firefighters to fight fires and rescue families in their late 50s - the lives of the general public and firefighters themselves will be endangered. None of us want a strike, but we cannot compromise on public and firefighter safety.” It will be the first nationwide strike of firefighters in that country in a decade.