Voter - Backed Pension Reform Is Dealt a Blow by California Supreme Court

Category: Blog Posts
Date: Aug 8, 2018 01:26 PM
Voter - Backed Pension Reform Is Dealt a Blow by California Supreme Court

This post was authored by Frances Rogers and Brett A. Overby.

Last week, the City of San Diego’s Proposition B, a 2012 voter-approved ballot measure designed to save the City’s weakening pension system, was dealt a potentially fatal blow by the California Supreme Court in Boling v. Public Employment Relations Board.  Although put to City voters through a citizen’s initiative, the Court nonetheless reasoned the City caused the changes to employee pension benefits and did so without first negotiating with labor unions.  The fate of those pension reforms that may help stabilize the City’s pension obligations now hang in the balance.

Proposition B

In reaching its decision, the Supreme Court relied heavily on the following facts. Under the City of San Diego’s “Strong Mayor” form of government, the mayor acts as the City’s chief executive officer whose responsibilities include recommending measures and ordinances to the City Council, and conducting labor negotiations with the City’s labor unions.  In 2010, San Diego’s former Mayor, Jerry Sanders, was outspoken on the need for pension reform due to mounting unfunded liabilities and the City’s budget strain. Reforming the City’s pension plan required an amendment to the City’s Charter which can only be accomplished through voter approval.  Proposals to amend the City’s Charter can be placed on a ballot before voters either by the City Council’s own motion or a citizens’ initiative whereby the proposed amendment is placed on the ballot by a petition of at least 15 percent of the City’s registered voters.  Mayor Sanders decided to champion a citizen’s initiative to bring his pension reform plan before the voters.

The citizen’s initiative sought to eliminate traditional defined benefit pensions for all newly-hired City employees, except for peace officers, and replace them with 401(k)-style defined contribution plans. Between November 2010 and March 2011, Mayor Sanders gave several press conferences in front of City Hall and issued numerous press releases containing the City seal publicizing his intent to craft language and gather signatures for a citizen’s ballot initiative to reform public pensions.  Mayor Sanders even declared his intent in his January 2011 State of the City address.  In March 2011, Mayor Sanders participated in a series of negotiations with his Chief of Staff, the City’s Chief Operating Officer, City Attorney, and a Councilmember to finalize the terms of the Initiative.

In April 2011, Mayor Sanders, two Councilmembers and the City Attorney held a press conference to announce the filing of a notice of intent to circulate the initiative. Thereafter, Mayor Sanders promoted the initiative and solicited signatures in interviews, in media statements, at speaking appearances, and in a “message from the mayor” circulated to the San Diego Regional Chamber of Commerce.

The Registrar of Voters certified that the initiative had over 15% of the verified voter approval required, entitling the initiate to a spot on the June 2012 election ballot. Mayor Sanders wrote an argument in favor of the initiative that appeared on the ballot.

Meanwhile, beginning in July 2011 the San Diego Municipal Employees Association and other employee organizations sought to negotiate the terms of any pension reform before putting it to voters. The unions argued the Mayor was acting in his official capacity to promote the initiative and, in doing so, made a policy determination related to mandatory subjects of bargaining.  City officials believed that a voter’s initiative that had a rightful place on the ballot upon meeting all legal and procedural requirements could not be subject to mandatory bargaining within the meaning of the Meyers-Milias Brown Act (“MMBA”).

The Ensuing Unfair Practice Charge

Prior to the election, Employee labor organizations filed unfair practice charges with the Public Employment Relations Board (“PERB”) over the City’s failure to meet and confer on the pension changes sought by the initiative. The unions also filed a petition for injunction in superior court which was denied.  In June 2012, Proposition B won approval by the City’s voters.

In December, 2015, after administrative hearing, PERB held the City violated the MMBA by placing the initiate on the ballot before exhausting the meet and confer process. PERB applied common law agency principles to find the Mayor was the City’s statutorily defined agent and had in effect ratified his policy decision.  PERB found the Mayor was not legally privileged as a private citizen to pursue changes in the terms and conditions of employment for the City’s represented employees.

The Court of Appeal’s Reversal of PERB’s Decision

The City challenged PERB’s decision by filing a petition for a writ of extraordinary relief in the Court of Appeal. The Court of Appeal annulled PERB’s decision and found that the City’s decision to place the citizens’ initiative measure on the ballot was purely ministerial because the City was required under its own Charter to do so upon the verified signatures of at least 15% of the City’s voters.  Thus, the City was not the actor and had no obligation to meet and confer.  The California Supreme Court granted review. 

The California Supreme Court Holds That the Obligation to Meet and Confer Should be Broadly Construed

The California Supreme Court initially held that when the facts are undisputed, PERB’s legal determinations are entitled to deferential review by the Court, even if conflicting inferences may be drawn from those undisputed facts.

The Court took guidance from its decision in People ex rel. Seal Beach Police Officers Assn. v. City of Seal Beach (1984) 36 Cal.3d 591, which addressed whether the meet-and-confer provisions of Government Code section 3505 applied when a city council exercised its own constitutional power to propose charter amendments to its voters.  In Seal Beach, the Court found that a public agency must comply with section 3505, even when it decides to take a proposal directly to the voters that could alter mandatory subjects of bargaining.  In this case, the Court held that the pension benefits in San Diego citizen’s initiative affected the terms and conditions of employment and fell within the scope of the unions’ representation.

The Court observed that Mayor Sanders was the City’s Chief Executive Officer and designated bargaining agent and was empowered by the City Charter to make policy decisions affecting City employees and negotiate with the City’s unions. The Court held that the Mayor used his authority and position within the City to draft, promote, and advocate for the initiative and used City resources and employees to assist him.  The Court found that it would defeat the intent of the Legislature in enacting section 3505 to allow public officials to “purposefully evade the meet-and-confer requirements of the MMBA by officially sponsoring a citizens’ initiative.”

The Supreme Court reversed the Court of Appeal ‘s decision and has now remanded the case to back to the Court of Appeal to rule upon a judicial remedy for the unlawfully imposed changes to the City’s pension system. PERB has requested the courts invalidate the results of the voter’s initiative election and/or issue a “make-whole” remedy of lost compensation for City employees affected by the changes to the City’s pension system.

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