A ruling on San Jose’s controversial pension reform initiative, Measure B, became public Monday, and both the city and union leaders claimed victory. Santa Clara County Superior Court Judge Patricia Lucas wrote in her decision that the “legal question is whether and to extent Measure B violates vested rights.” The tentative decision was signed on Dec. 19 and given to city law firm Meyers Nave on Monday morning. Attorneys for the city are currently conducting an analysis of the decision.
Jim Unland, president of the Police Officers Association, told San Jose Inside that he hasn’t read the full decision but the outcome was apparent: “We won, they lost,” he said.
City Attorney Rich Doyle sent an email informing the Mayor Chuck Reed and the City Council of the decision, and he included the following bullet points:
• The provision requiring voter approval for any increases in retirement benefits was found to be valid.
• The 4% increase in employee pension contributions towards the unfunded accrued actuarial liabilities [UAAL], up to a maximum of 16 percent (or 50 percent of the total liability, whichever is less), impairs a vested right and is invalid.
• The VEP is invalid (it appears that this determination by the Judge may be, at least in part, due to the lack of IRS approval).
• It appears that the disability retirement provisions have been upheld in full.
• The elimination of the SRBR was upheld.
• The ability to suspend the retirement COLA provisions for up to five years in a fiscal and service level emergency was found to be unlawful and invalid.
• The minimum contributions towards retiree healthcare was found to be not invalid with respect to the inclusion of unfunded liabilities, but would impair a vested right to have the City pay “one to one”.
• There is no vested right in a particular health care plan in retirement. However, under the Federated plan, the change to take away the right to have access to healthcare benefits that are fully paid for violates a vested right and is invalid. For police and fire, the argument that they had a vested right in a specific plan when they retired was rejected.
• The decision upholds the alternative of a mandatory wage reduction to offset the finding that the increase in employee pension contributions was invalid.
• The severability provisions of the Measure, meaning sections that were found to be valid would go into effect even if other sections were found to be invalid was upheld.
Councilman Pete Constant, a former police officer and Measure B backer, said about two-thirds of Measure B’s changes were upheld.
“The important thing is it preserves the $21 million in savings that we’ve already put in place,” Constant said. “That’s really important, because we now move into next year’s budget with certainty.
“It upheld the rule of voter authority over any future pension changes.”
Unland disagreed. “The vested right doctrine once again held up again,” he said. “[City officials] can play their cute numbers game, but the core of what measure B was was invalidated.”
Click here to read the full Measure B court ruling.
UPDATE: Mayor Chuck Reed released the following statement:
“I am pleased that Judge Lucas has upheld a majority of the Measure B provisions and has protected a vast majority of the targeted fiscal savings that will help rebuild essential public services and protect the long-term sustainability of our employee retirement systems.
“In particular, this ruling protects $20 million in annual savings the City is already reaping due to the elimination of bonus pension checks and changes to our retiree healthcare plans. Those savings have allowed us to slowly begin restoring services to the public and slowly begin restoring pay to our employees.
“Unfortunately, the Judge’s decision to invalidate certain portions of Measure B also highlights the fact that current California law provides cities, counties and other government agencies with very little flexibility in controlling their retirement costs. That’s why I believe that we need a constitutional amendment that will empower government leaders to tackle their massive pension problems and negotiate fair and reasonable changes to employees’ future pension benefits.”