Exploring Public Safety Pensions (Part 2)

Blog Post
Orange County California
Exploring Public Safety Pensions (Part 1) explored how public safety pensions came into being, the forces that influenced the process, etc. It is not intended to be a polemic, only an overview. In Part 2, we turn to the recent case of Orange County California vs The Association of Orange County Deputy Sheriffs.
It is instructive when we consider the legal standing of public safety pensions. I realize that some who read this blog feel that any agreement entered into by a government entity to do something that doesn’t sit well with them after the fact should be repealed. That was Orange County’s position.

The appellate judges who reviewed this case included 2 Republicans and 1 Democrat. You can make of that what you will, but in each case, both at the trial and appellate level, the judges ruled unanimously against Orange County.
A contract is a contract and binds the county (and the taxpayers). Elections have consequences.
There was never an assertion that the Orange County Retirement System (OCRS) was insolvent in any way. Last year, it earned nearly 20% on investments. The Board of Supervisors simply wished to repudiate what earlier supervisors had agreed to, citing the potential of unfunded liabilities.
You should also consider the position of those who retired based on a contract. The county had no intention of allowing aging pensioners to come back and work as active Sheriff’s Deputies and supervisors (assuming their ranks when they retired). That would have been lawsuits waiting to happen. They simply asked the court to strip 1/3 of their contractual pensions from them.
There was no allegation of fraudulent or deceptive practices when the contracts were entered in to. The Orange County Board of Supervisors simply felt that retired deputy sheriffs were making out better than they deserved.

The Results:

(The Orange County Register – Article)
After An Extremely Short Deliberation, The County Of Orange’s Legal Effort to Overturn 3% At 50 pension benefit For Orange County Deputies was thrown out of court for a third time. 
LOS ANGELES – The Second District Court of Appeals unanimously affirmed in a 3 to 0 opinion today, to uphold an earlier judgment by the Los Angeles County Superior Court, to throw out the County of Orange’s lawsuit to overturn 3% at 50 pension benefits for Orange County Deputy Sheriffs (COUNTY OF ORANGE v. ASSOCIATION OF ORANGE COUNTY DEPUTY SHERIFFS et al., Case #B218660). After an extremely quick 7 days of deliberation, the court also awarded the Association of Orange County Deputy Sheriffs (AOCDS) their costs for the appeal. 
The decision marks the third time in 2 years the County of Orange has been rejected by the courts in their legal effort to overturn 3% at 50 pension benefits for Orange County Deputy Sheriffs. They were quickly tossed out of Los Angeles Superior Court last February 26 and again on May 22, before even being set for a formal hearing. 
The County of Orange filed the controversial lawsuit in February 2008, despite having three different outside law firms they had hired for legal counsel, warn them they could not win such a case. As of July 31, 2010, they have spent almost $2.3 million on their legal costs.
The taxpayers were stuck with the bill:
As of July 31, 2010, the County of Orange has spent a total of $2,264,166.34 in legal costs associated with the Board of Supervisors’ litigation effort regarding Orange County Deputy Sheriffs’ pensions.
Law Firm                                                                       Amount Paid
Orrick, Herrington & Sutcliffe LLP                                $  99,598.40
(Jan. 1, 2006 to Dec. 1, 2007)
Reish Luftman Reicher & Cohen                                 $125,561.04       
(Jan. 1, 2007 to Dec. 1, 2007)
Snell & Wilmer LLP                                                        $  57,713.00
(June 30, 2007 to Dec. 1, 2007)
Kirkland & Ellis LLP                                                   $1,981,293.90
(June 1, 2007 to July 31, 2010)
TOTAL LITIGATION COSTS BY COUNTY            $2,264,166.34

Definitions: 3% at 50 means that the retiree can draw three percent of base pay per year worked based on an average of the three highest earning years. The earliest that they can draw this is age 50. If somebody joined the Orange County Sheriff’s Department at age 25 and worked 25 years to age 50, they could retire at 75% of their base pay, which does not include benefits. Previous to this system coming into practice, deputies earned 2% at 50 (under the scenario cited, they’d earn 50% of pay at age 50).

Part 3 will be posted on this blog on Monday, 29 July 13 at 0400 HRS PST

9 thoughts on “Exploring Public Safety Pensions (Part 2)

  1. Sounds like the ONLY winners were Kirkland and Ellis… They soaked the County for a bunch of $$ for something that wasn't going anywhere anyway… And I'm betting the County is going to continue to fight this, rather than actually abide by the decision!

  2. There wasn't much else that they could do. The California Supreme Court was going to come down on the side of the two trial courts and the Second District Court of Appeals, all of which beat them like unwanted stepchildren.

    And the point here is that absent fraud or complete collapse (as with Detroit) governments and voters can't repudiate pensions. Therefore, you can move forward and make changes to the system but you can't beat up the retired — legally.

  3. "And the point here is that absent fraud or complete collapse (as with Detroit) governments and voters can't repudiate pensions. Therefore, you can move forward and make changes to the system but you can't beat up the retired — legally."

    Exactly correct, and without bankruptcy, the Republican judges would be four square with that. The problem occurs when the pensions destroy the entity they feed off of. After all county assets are sold to pay the pensions, after all taxpayers are soaked as much as they can be politically, the math asserts itself, and the system itself collapses. That is the ultimate problem, and one which the public employees should consider carefully. They should also consider their reputations in the communities they have to live in. They claim to be public servants, not the devourers of all and everything. They might want to live up to their claim.

  4. Blaming the employees doesn't work any more than blaming the market for "market prices". The problem, as will be discussed in greater detail in Part 3 tomorrow, lays with the people who vote the pay and benefits. If you are in private industry and an employee asks for a raise and you give it to them, should you blame the employee.

    These are political issues that can only be addressed politically.

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