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Lawsuit targeting Sonoma County pension hikes seeks hearing from California Supreme Court

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Sonoma County public pension costs, at a glance

2019-2020 taxpayer costs: $122.8 million

Pension bond debt: $50.3 million

Unfunded long-term obligations: $371 million

A retired Santa Rosa attorney is pressing the California Supreme Court to take up his lawsuit seeking to invalidate the enhanced pension benefits granted to Sonoma County government employees in the early 2000s.

The suit filed by George Luke in Sonoma County in 2017 has twice been rejected by lower courts. It echoes claims put forward more than eight years ago by a group of local public pension system critics who alleged the county did not meet all of its legal obligations in approving the richer retirement benefits nearly two decades ago.

Since then, the annual taxpayer cost to support county employee pensions, including payments on pension bonds, has more than tripled, rising from about $35 million as of mid-2003 to more than $122 million, according to county data.

Luke’s potentially groundbreaking but long shot legal case seeks to undo the pension hikes that have driven much of that rise. It would affect thousands of county employees and retirees.

“It’s really about whether you can go along fat, dumb and happy as a public official and behave as if you’re behaving legally when you actually have no legal basis on which to act,” said Bob Loewen, an attorney who chairs the board of the California Policy Center, a conservative think tank backing Luke’s case. The center has supported similar litigation in Marin County and elsewhere in the state.

A Sonoma County Superior Court judge ruled in the county’s favor in August 2018, and a state appeals court affirmed that ruling against Luke in December.

County attorneys and the county grand jury separately found in 2012 that officials had not fully met public notice requirements when the Board of Supervisors approved the benefits.

But the apparent procedural flaw wasn’t enough to invalidate the pension hikes, county attorneys said at that time — a point they continue to stress.

Debbie Latham, chief deputy county counsel, acknowledged that while the county may not have strictly complied with state law when it approved the increased benefits, that shouldn’t be considered egregious enough to unravel retirement benefits relied upon by thousands of people.

“It was a procedural misstep that wasn’t significant enough to unwind the whole decision,” Latham said. She said she did not want to elaborate further on the county’s defense to “give deference to the Supreme Court and not try to politicize it.”

The case appears to hinge on Luke’s argument that the legal window to contest the benefit hikes has not closed.

But the opinion from appellate judges frowned on one of his key underlying contentions: that each Sonoma County pension payout affected by the hikes amounted to a new violation of state law. In Luke’s view, that should reset the window to legally challenge the pension hikes.

The court saw it differently.

“That a pensioner has a continuing right to a pension does now mean that (the law) imposes a continuing obligation on the county,” the court panel wrote. The judges saw a clear difference between pension payments and illegally approved tax hikes, which amount to a fresh violation each time the tax is collected, according to a 2001 state Supreme Court ruling.

Sonoma County public pension costs, at a glance

2019-2020 taxpayer costs: $122.8 million

Pension bond debt: $50.3 million

Unfunded long-term obligations: $371 million

Luke’s appeal argues the lower court’s opinion “has the effect of creating a vested right to an illegally granted pension benefit.”

“That has never been the law, and should not be the law,” his attorneys wrote.

California law and legal precedent provide strong safeguards for pension rights as established contracts. A decision by the state’s high court to hear the case would be significant, and any ruling would be closely watched, with implications for local government employees far beyond Sonoma County.

Loewen argued that California’s strong pension protections have “always been dependent on having a valid and lawful contract to begin with.”

“This new court of appeal decision has basically blown the lid off that and says that even if you don’t have a valid contract, there are vested rights anyway,” Loewen said. “That is a big problem for taxpayers.”

The county has asked the court to deny further review of Luke’s suit, characterizing his challenge as an untimely, legally flawed move to “upend the retirements of thousands of current and former county employees.”

Starting in 2012, the county adopted discretionary and state-mandated changes to its pension system that established lower tier benefits for new employees and greater cost-sharing for employees. Though annual pension costs continue to climb, equating to 18.4% percent of payroll, the changes are expected to help drop that to less than 10% by the end of the decade. The pension system’s unfunded liability amounts to $371 million.

The county is set to release a new pension cost forecast next month; the most recent data, from May 2018, indicates that pension costs will decrease significantly over the next decade.

“It’s an important issue, and they know it,” Latham said of county government leaders. “This lawsuit is just not the vehicle to do that.”

You can reach Staff Writer Will Schmitt at 707-521-5207 or will.schmitt@pressdemocrat.com. On Twitter @wsreports.

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