California State Agency Effort to Nullify Pension Vote Is Eerily Totalitarian

A union-controlled state agency trying to overturn a citizen initiative passed in San Diego has finally been rebuffed in court.

If you're wondering how far unions and the California officials will go to kill any reform of the state's overburdened public pension system, wonder no more: consider instead the latest chapter, last week, in a state agency's long-running effort to invalidate San Diego's 2012 citywide vote to reform pensions.

The good news: a California appeals court rejected the Public Employment Relation Board's (PERB) efforts last week. But it's still shocking the agency's officials would have even argued that a union's right to negotiate pay and benefits trumps is the public's right to hold an election.

The story began in 2012, when San Diego reformers collected 116,000 signatures to place Proposition B before the voters. The measure moved newly hired city workers (excluding police) from a guaranteed pension to a 401(k) retirement program. It also put a five-year freeze on payroll spending as a way to cap "pensionable pay" and reduce unfunded liabilities.

A large majority of the city's voters, 66 percent, approved the measure. Unlike a measure that passed in San Jose on the same day and was subsequently gutted by the courts, San Diego's did not reduce benefits for current employees and has therefore not run afoul of something known as the "California Rule." That rule forbids officials from reducing vested benefits for government employees, even for future work.

Even though San Diego's Proposition B has passed court muster, state officials and unions continued to fight it. The PERB, a little-known California state agency, is responsible for implementing various union-related statutes and remedying "unfair labor practices." A majority of its members have worked for public-sector unions, which gives you a sense of its political tilt.

PERB entered the fight early, suing to keep Proposition B off of the ballot. That suit failed, the ballot measure succeeded wildly, and for the last five years PERB has been trying to invalidate the results of that election, based on a dubious premise. California law requires cities to "meet and confer" with public-sector unions over any proposed changes to their benefits. Because the initiative tinkers with such benefits, the agency claims that city officials were required to first negotiate with the unions over the proposed pension changes.

Their argument would have some merit had the city government placed the initiative on the ballot, but this was a citizen initiative. To get around that problem, PERB came up with a novel theory. "They argue that Proposition B is not really a citizen initiative, but is a 'sham' initiative placed on the ballot by 'straw men' acting for San Diego's mayor who supported and campaigned for the measure," explained then-city attorney Jan Goldsmith, in a San Diego Union-Tribune op-ed in 2012. He depicted the PERB effort as an assault on San Diegans' constitutional rights.

The agency's argument was built on the fact that San Diego's mayor and two council members backed the initiative, and worked on its behalf as private citizens. Therefore, PERB argued, Proposition B needed to be treated like a city-sponsored initiative.

PERB is an administrative agency that acts as its own police force, judge and jury. Its administrative law "judge" issued a 58-page ruling determining that "the city breached its duty to meet and confer in good faith" with various unions.

The agency could have saved 57 pages of verbiage; the outcome was never really in doubt. Former San Diego councilman Carl DeMaio, a pension-reform backer, termed it a "kangaroo court," which is an apt description of PERB and other similar administrative agencies. The "judge" is actually an agency employee. The agency is no fair and balanced arbiter of the facts, but is a union-controlled agency that advances union prerogatives.

PERB insisted that new hires in San Diego be retroactively granted those big defined-benefit pensions—plus interest. But the city appealed the agency's decision to a real court, thus resulting in last week's decision. "(A) city has no obligation … to meet and confer before placing a duly qualified citizen-sponsored initiative on the ballot, and only owes such obligations before placing a governing-body-sponsored ballot proposal on the ballot," the appeals court ruled.

What about PERB's assertion that city officials cannot ever act as private citizens? "We further conclude PERB's fundamental premise … is legally erroneous," the court concluded.

A PERB victory in the case would have cost the city of San Diego $20 million.

PERB's gambit almost worked, however. As a Union-Tribune editorial pointed out, had San Diego's city attorneys not challenged the ruling, and had its mayor and city council not voted to appeal the decision, PERB's assault on voting rights would have stood. "Luckily, an appeals court delivered taxpayers and voters a major victory, safeguarding San Diegans' right to limit city worker pensions—while also protecting Californians' constitutional right to direct democracy," the newspaper rightly opined. So the city—and voters statewide—dodged a bullet.

The victory was sweet, but there's something wrong with the way the system is rigged in favor of union prerogatives. We have the state using its official powers to squelch a local reform initiative. Last week for California Policy Center, I detailed how state attorneys general often give biased titles and summaries to pension reform initiatives as a way to strangle them in the cradle. It's hard to overcome all of these official obstacles.

PERB is an annoyance, but the biggest statewide reform obstacle remains that California Rule. On that above-mentioned state Supreme Court matter, the court has agreed without comment to accept an appeal from a firefighters' union. The union is challenging a unanimous San Francisco appeals court ruling that upheld the California Public Employees Pension Reform Act of 2013. The law mostly alters pensions for new hires, but also limits some pension-spiking gimmicks by current employees.

The firefighters claim that restrictions on "airtime"—i.e., their ability to purchase additional requirement credits—is a violation of their constitutional rights. A Marin County case also making its way to the high court involves five unions who likewise claim that other limits on pension spiking violate the California Rule. In the Marin case, a court ruled that "while a public employee has a 'vested right' to a pension, that right is only to a 'reasonable' pension—not an immutable entitlement to the most optimal formula of calculating the pension."

If the Supreme Court agrees, that could finally whittle away at the rule. Between that and the court's willingness to put the brakes on PERB, reformers have reason for optimism. The good news is the result of the overreach of public-employee unions, who are so used to getting their way that they were willing to challenge the constitutional right to an election and defend the most indefensible pension-spiking gimmicks. Perhaps they've gone too far.

This column was first published by the California Policy Center.