Guv Brown has plans for pension reform. So does former LA Mayor Riordan. Cities up and down the State have plans to fix the problem—for the future.
“A legal dispute from the city of Redding has led the Third District Court of Appeal in Sacramento to issue a ruling that has been deemed a setback for local governments. The case posited that regardless of whether or not a city or county can afford the costs, past commitments oblige a local government to pay future retirement benefits to its employees.”
In fact, thanks to the courts and previous sweetheart pension deals between unions and those the unions elected to office, you will be unable to stop the coming bankruptcy of many of California’s large cities. This is a disaster that will happen, the only question is when.
Appeals Court Rules Local Govt Bound by Past Commitments to Pay Future Retirement Benefits
California City News, 11/6/12
A legal dispute from the city of Redding has led the Third District Court of Appeal in Sacramento to issue a ruling that has been deemed a setback for local governments. The case posited that regardless of whether or not a city or county can afford the costs, past commitments oblige a local government to pay future retirement benefits to its employees.
Redding was sued by the International Brotherhood of Electrical Workers in 2010 when it imposed a funding change for retiree health costs. The union argued that a contract said the city was required to pay half of the health insurance costs “for each retiree in the future.” The question is whether that language was binding. The Chronicle points out that the city wanted to “fund 2 percent of retirees’ health care costs for each past year of service, up to a maximum of 50 percent. Redding had funded 50 percent of all retiree health costs in contracts since 1978.”
The city tried to argue as follows: (1) public employees cannot have a vested right to lifetime retiree health benefits absent an express legislative authorization, (2) the language in the MOUs did not confer a vested right to lifetime retiree benefits, and (3) extrinsic evidence of the City’s promises to provide lifetime retiree health benefits was insufficient to create an obligation on the part of the city.”
But in a 3-0 ruling, the appeals court found that a labor agreement can provide “vested rights” that remain in effect after the agreement expires. The ruling states the following:
“The fact that the future right of active employees to receive retiree medical insurance benefits remained subject to the collective bargaining process does not necessarily mean that prior MOUs, ratified by the city council, did not already create a contractual obligation that survived the expiration of the MOUs. When the parties so intend, a MOU between the parties may provide vested rights beyond the expiration of the MOU.”
Read the full ruling here. The appeals court decision reinstates the case.
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May 15, 2013 at 8:30 am