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O.C. may try to trim deputies' pensions

Any attempt to address looming fiscal debt will meet fierce resistance.

August 01, 2007|Christian Berthelsen | Times Staff Writer

Orange County initiated a high-stakes, first-of-its-kind battle Tuesday to rein in costly public employee benefits as the county's Board of Supervisors voted to launch an effort to scale back the pensions of sheriff's deputies.

The move comes as local governments throughout the state struggle to cover the ballooning cost of public pensions, which some project will force officials to slash government programs and services in coming decades.

Over the objections of the sheriff, the district attorney and the sheriff's deputies union, supervisors unanimously agreed to consider rescinding portions of the deputies' pension packages, which were approved in 2001.

In wading into the fray, the county is pursuing a novel legal strategy contending that part of the deputies' contract is unconstitutional. Public safety officials say the contract is legal and binding, and that it would be unfair to take it away now from retired deputies.

For The Record
Los Angeles Times Thursday August 02, 2007 Home Edition Main News Part A Page 2 National Desk 1 inches; 49 words Type of Material: Correction
Pensions: An article in Wednesday's Section A about an effort to reduce Orange County's unfunded pension liability by scaling back the pensions of sheriff's deputies reported that Los Angeles County also faces an underfunded pension plan. Los Angeles County's retiree healthcare obligations are underfunded but not its pension plan.

The fight appears likely to wind up in court, and the county's aggressive stance is accompanied by a fair degree of uncertainty. Politicians and government workers throughout the state will probably be watching the outcome.

"It's the first significant thing of this sort to be done," said Steve Frates, a senior fellow at the Rose Institute of State and Local Government at Claremont McKenna College. "We don't know what the results will be."

Orange County is one of scores of public agencies facing a crushing debt from generous pension packages approved in the wake of the stock market run-up of the late 1990s. Others include the Los Angeles Unified School District and Los Angeles, Contra Costa and Marin counties.

Politicians typically signed off on the benefits when pension funds were flush with cash, adding tens and sometimes hundreds of thousands of dollars in value to the retirement packages of rank-and-file employees.

Agencies face debt

When investments declined, many found themselves with bills they could not afford to pay.

The fight in Orange County could be extraordinary. Orange County Sheriff Michael S. Carona predicted that the consequences could be "cataclysmic" for his rank and file. A union official said the families of fallen officers could suffer.

Under the deal approved by the county and the Assn. of Orange County Deputy Sheriffs in 2001, deputies were allowed to retire at age 50 with 3% of their highest year of pay, multiplied by their years of service. The plan's proponents say the average pension of a deputy who retired after the new agreement took effect in 2002 is about $70,000 per year.

The agreement added a percentage point retroactively to a deputy's years of service, which created an immediate pension shortfall because additional funds hadn't been set aside for the boosted retirement pay of veteran officers.

Supervisors focused on rescinding this retroactive portion of the agreement, which some county officials estimate may have created as much as $550 million in pension costs over 30 years -- a debt they say they cannot cover.

Rolling back that retroactive portion of the agreement would save the county nearly a quarter of the county's total $2.3 billion in unfunded pension liabilities.

Led by Supervisor John Moorlach, the county is arguing that the agreement violated the state Constitution because it created an unfunded debt, amounted to a gift of public funds and constituted extra pay for work already performed.

"An illegal contract can and must be rescinded," said Mario Mainero, Moorlach's chief of staff, in a presentation to supervisors at Tuesday's hearing. "The county cannot agree to a deal that burdens future generations."

As a candidate for county treasurer in 1994, Moorlach famously warned that Orange County's money was invested in high-risk vehicles. He lost that election but was vindicated six months later, when the county declared a $1.7-billion bankruptcy.

He was appointed to fill the remainder of treasurer Robert L. Citron's term and was reelected twice. He was elected to the Board of Supervisors last year; he and the deputies union have become frequent adversaries.

Moorlach's argument will run headlong into a large body of state and federal constitutional and legal protections that have generally safeguarded pensions from employers seeking to roll them back, particularly for governments and their public employees. But there also have been a few cases in which agreements were invalidated because their basis was found to be illegal. It will also face stiff opposition from politically powerful public employee unions.

"I personally think that this claim is from left field," said Stephen Silver, a Santa Monica lawyer who represents nearly 75 public safety unions throughout the state. "I'm not aware of any case that has allowed an employer to rescind or renege on an agreement to provide benefits that it promised."

The plan also had the backing of conservative legal scholars and the Lincoln Club, a powerful Orange County small-government advocacy group.

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