An initiative that would phase out Ventura County employee pensions is headed for a court test, challenged by a union lawsuit contending the change requires state legislation.
Ventura County supervisors put the initiative on the November ballot after the required number of voter signatures were submitted. Then a board majority, who oppose the initiative, told the county counsel to back the suit to keep the initiative off the ballot.
The maneuver earlier this month sets up a court test, presumably before ballots are printed, of whether local voters can phase out the 20 county retirement systems, ranging in size from Los Angeles to Mendocino, that operate under a 1937 act.
Like an initiative approved by San Diego voters two years ago, the Ventura initiative gives new county hires a 401(k)-style individual investment plan, instead of a pension, and reduces current worker costs with a five-year freeze on pensionable pay.
The San Diego initiative exempted police, allowing new officers to receive pensions. The Ventura County initiative, backed by the county taxpayers association and others, has no exemption and would give new deputy sheriffs a 401(k)-style plan.
In the legal challenge, the key difference is that the San Diego pension plan operates under the city’s laws while the Ventura County pension plan operates under a state law.
“Because the measure proposes only a local ordinance, which cannot by law disestablish the 1937 act plan in the county, the measure is illegal and of no effect,” Leroy Smith, the Ventura County counsel, said in a 21-page analysis.
“Once accepted, the 1937 act provides no procedure by which a county can disestablish the retirement system or unaccept the retirement law by any subsequent local action, either by the voters or by the board of supervisors.”
The 1937 act provides no authority or process to withdraw from the system, Smith wrote, so the proper method to “repeal or amend a state law such as the 1937 act” is through state legislation or a statewide initiative.
David Grau, chairman of the Ventura County Taxpayers Association, said he is confident the initiative will withstand the legal challenge. “We got a legal opinion first,” he said. “That was the basic question: Can the voters change the system.”
Attorneys for the initiative backers said in a letter to Smith, responding to a union threat of a lawsuit if supervisors put the measure on the ballot, that voters can legally repeal the pension plan and replace it with a 401(k)-style plan.
“This measure amends Ventura County Ordinance Number 401 which established the pension program in 1946 by a vote of the people,” wrote attorneys Kenneth Lounsbery and James Lough. “The power of the people to adopt a measure carries with it the power to repeal by the same means.”
The lawsuit filed by the public employee union coalition said the initiative is unlawful for several other reasons, including a violation of state labor law requiring good faith negotiations with unions before determining types and amounts of benefits.
In San Diego, the state Public Employment Relations Board unsuccessfully tried to get a court to block a vote on the pension initiative, prompting the city attorney, Jan Goldsmith, to say in one interview, “They are owned and operated by labor unions.”
The San Diego pension initiative was approved by 66 percent of the voters. In the same election in June 2012, a San Jose reform giving employees a choice between higher pension contributions or a lower pension was approved by 70 percent of voters.
Last January, a statewide poll issued by the Public Policy Institute of California found that switching new state and local government hires to a defined contribution system similar to a 401(k) plan was supported by 73 percent of likely voters.
“They know the only hope they have is to keep it off the ballot,” Grau said of union opposition to the Ventura County initiative. “They know it is going to win by a big margin.”
Four of the five members of the Ventura County board of supervisors, including Chairman Steve Bennett, oppose the pension initiative. The lone supervisor supporting the initiative is Peter Foy.
At a board meeting this month, Bennett said he thinks voters are likely to approve the initiative. He said a 4-to-1 decision to back the union lawsuit is an attempt not to block a vote on the initiative, but to ensure that the law is being followed.
“The public’s understandable and appropriate frustration” with high pensions, some paying $250,000 a year, is “driving people to say they would accept almost any measure that would attack the pension system,” Bennett said.
Ventura County is associated with “spiking,” the manipulation of final pay to boost pensions. In what became known as the “Ventura decision,” a 1997 state Supreme Court decision in a deputy sheriffs suit expanded pensionable pay for county systems.
An analysis done by the Los Angeles Times two years ago found that 84 percent of the Ventura County retirees with pensions greater than $100,000 had pensions that paid them more each year than their salary while working.
The Ventura County pension initiative prompted a proposal that an association of the 20 county systems operating under the 1973 act hire a public relations firm to educate the public about the benefits of pensions.
Robert Palmer, executive director of the State Association of County Retirement Systems, said attorneys told SACRS that it can “educate” but not “advocate,” an important legal distinction.
Four years ago the California State Teachers Retirement System issued a $600,000 contract to two public affairs firms to tell members of the system and legislators about the need to close a huge funding shortfall.
Last week Gov. Brown signed full-funding legislation that will gradually increase CalSTRS funding by more than $5 billion over the next seven years, nearly doubling the current $5.8 billion a year contribution.
The new SACRS president, Yves Chery, said in a memo this month that the public relations proposal produced “very little formal feedback” from the county systems, but a variety of comments from SACRS staff.
“Some have said that trustees are fiduciaries, not proponents of DB (defined benefit pensions),” Chery wrote. “Some believe that this matter is a plan sponsor and labor organization issue. Others have said that to do anything in the way of a public relations firm creating public support could become very divisive at the local level.”
Chery said he appointed a five-member committee to study the educational campaign issue and make a recommendation. Among the questions his memo said the committee may try to answer:
“Does SACRS have an obligation to become involved with initiatives, such as Ventura? If so, to what level?