In September 1977 — nine months before California voters staged a “taxpayer revolt” in passing Proposition 13 — the California Taxpayers Association and the state Legislature teamed up on a less-exciting piece of watchdog legislation known as SB 439. It required leaders at every level of government to be open and straightforward when approving increases in retirement benefits.
In a letter to the state’s 39-year-old governor, Jerry Brown, state Sen. Newton Russell encouraged the governor to sign it.
“I have witnessed far too many instances of ‘end-running’ local government by employee groups asking the Legislature to grant ‘permissive’ legislation with the final result being that local government approves employee retirement benefit increases without the taxpayers ever knowing the real cost,” Russell wrote.
The bill was simple. It requires state and local legislative bodies, before approving any public pension increase, to hire a professional actuary to develop financial projections on how much the increases would cost over the long haul. These predicted annual costs then have to be made available to the public at least two weeks before the increases can be approved.
Russell, who would serve 32 years in the Legislature, understood the loopholes in state law that led to abuses. He had warned the public about “spiking” and other shenanigans.
“I can remember … when assemblymen would stand up and present bill after bill that dealt with retirement benefits,” he told the Los Angeles Times in an interview in 1981. “Nobody had the faintest idea whether the benefit was justified. It was a subject that nobody really understood.”
But he did. As his obituary in the Times noted in 2013, he “was an expert on California’s complex public pension system and a stickler for upholding legislative rules.” He was respected on both sides of the aisle and was, as former Senate Democratic leader David Roberti of Los Angeles once said, the “conscience of the Senate.”
The governor signed the bill. And SB 439 became part of what is now Government Code Section 7507.
Here’s why this is relevant to Sonoma County today. Section 7507 is now at the heart of a lawsuit filed by a retired Santa Rosa trial attorney who is hoping to turn back the clock on Sonoma County’s pension crisis.
In his suit against the county, George Luke, a resident of Santa Rosa since 1975, argues that the county did not follow the rules when it significantly boosted public employee retirement benefits in 2002 and 2003. He claims the Board of Supervisors did not hire its own actuary to make cost projections. It did not publicly disclose those costs at least two weeks before the increases were approved and a public hearing was never noticed.
The supervisors at the time “never obtained truthful, accurate, complete and reliable information to fulfill its fiduciary duty to determine the true nature and extent of the financial risks associated with increases in pension benefits,” the suit says.
Because they did not follow the law, “the action is void,” Luke argues. “It’s like it never happened.”
Why should locals care? Because those enhanced benefits, as noted earlier this year by the Citizens’ Advisory Committee on Pension Matters, are expected to eat up nearly $50 million a year in additional expenses from the county budget between now and 2030. That’s money that could be going to park maintenance, housing assistance and other programs.