O.C. to Sue to Reduce Pensions
Supervisors hope to save millions by repealing part of an agreement reached with deputies.
January 30, 2008
By CHRISTIAN BERTHELSEN
Los Angeles Times Staff Writer
After months of legal preparation, the Orange County Board of Supervisors voted unanimously Tuesday to file a lawsuit seeking to repeal part of their pension agreement with sheriff's deputies, saying the county cannot afford the expense.
If the suit is successful, the county could potentially save $187 million in the coming decades. But it would also mean incurring the wrath of one of the county's most politically powerful unions.
A county spokeswoman said the lawsuit had been drafted and would probably be filed in days.
The board voted to move forward over the objections of interim Sheriff Jack Anderson, whom supervisors appointed two weeks ago to run the department after Michael S. Carona retired to fight federal corruption charges. Anderson said the move would harm the county's ability to recruit talented deputies and potentially harm the vibrant local economy that has flourished amid modest crime rates.
The decision was led by board Chairman John Moorlach, who had been researching a potential challenge to the deputies' pension agreement since he entered office more than a year ago.
Moorlach, who previously served as county treasurer, spearheaded the move to revise the agreement. He has long advocated reforming the county's pension agreements with its public employee unions, because the generous deals -- much like those struck elsewhere in the state in recent years -- have created an estimated $2.3-billion pension fund shortfall over the next 30 years.
There is also a history of bad blood between Moorlach and the Assn. of Orange County Deputy Sheriffs, which backed his opponent in his 2006 race for supervisor. Moorlach has denied that there was any personal animus to his proposal.
"We have an obligation to address this as a matter of fiscal responsibility," he said during Tuesday's hearing.
The provisions allowed them to retire at age 50 with annual pension payments totaling 3% of their highest year's pay, multiplied by their years of service -- an increase from 2% under the previous deal -- and granted the benefit retroactively. Moorlach's office estimated the deal augmented individual pensions by a third, allowing deputies, on average, to retire with a pension of $70,000 a year.
Supervisors now say the agreement was not legally sound because the retroactive portion created a shortfall in the pension fund and gave extra pay for work already performed, violating the state Constitution's prohibitions on deficit spending and gifts of public funds.
Though supervisors said they were pursuing the matter to resolve "uncertainty" over whether the pension benefit was legal, their decision amounted to a declaration of war on the deputies union. In response, union President Wayne Quint said: "Uncertainty? There was no uncertainty until John Moorlach and his chief of staff cooked this up last summer. It's disingenuous. It's hypocritical."
Though the county will technically name the county's employee retirement system as the defendant, the deputies' union plans to join the case as an interested party and fight the effort aggressively. The union maintains that an entire body of law -- ranging from the California Constitution to case law and an opinion by former state Atty. Gen. George Deukmejian -- protects their pension agreement because the deal was struck in good faith through collective bargaining.
Election-year politics lurked just below the surface throughout Tuesday's debate. Two supervisors, Janet Nguyen and Bill Campbell, are up for reelection this year, and the issue of reforming public employee pensions and reining in their unions plays well with conservative voters.
But the move also infuriated the politically powerful unions that represent firefighters, teachers and public safety managers, in addition to the deputies. There were less-than-subtle suggestions that the unions "would not sit idly by," in the words of Arlene Pavey, president of a group of retired members of the California Teachers Assn., if the county went ahead with the lawsuit.
The county spent more than half a million dollars to hire four law firms for advice on the case last year, and the amount has probably increased since then. At least two of the firms concluded the case was not legally viable.
The firm most recently hired by the county, Chicago-based powerhouse Kirkland & Ellis, recommended going ahead, although the partner in charge of handling the case, Robert R. Gasaway, warned it could get expensive. Spending $1 million or more was "not unreasonable" -- with no guarantee of success
"Civil litigation costs money, and this is no different," Gasaway told supervisors during the hearing. "There are no guarantees in litigation. But I urge this board to consider their obligation to uphold the California Constitution."