HomeMy WebLinkAboutMINUTES - 11172015 - D.7RECOMMENDATION(S):
ACCEPT the report from the Legislation Committee on the referral to the Committee regarding legislative policy
related to pension reform.
FISCAL IMPACT:
No fiscal impact from receiving this report. The matter of pension benefits has fiscal impacts that are detailed in the
attached documents.
BACKGROUND:
At its July 28, 2015 meeting, the Board of Supervisors considered and approved the response to Civil Grand Jury
Report No. 1503, "Time for a New Look at Pension Costs," and referred the matter of pension legislative policy to
the Legislation Committee. The Board Order is Attachment A. The Grand Jury Report No. 1503 is Attachment B . The
response to the report is Attachment C.
The Civil Grand Jury Report No. 1503 examines the cost of pension and retiree health benefit obligations on the
County and contends that "...the County has not challenged the prevailing assumption that California law prohibits it
from negotiating reductions in pension benefits for its employees who entered service before 2013. We believe that
assumption is in error... The Board of Supervisors should without delay seek such a change or clarification in
California law." (p. 1,
APPROVE OTHER
RECOMMENDATION OF CNTY
ADMINISTRATOR
RECOMMENDATION OF BOARD
COMMITTEE
Action of Board On: 11/17/2015 APPROVED AS
RECOMMENDED
OTHER
Clerks Notes:
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Candace Andersen, District II
Supervisor
Mary N. Piepho, District III
Supervisor
Karen Mitchoff, District IV
Supervisor
Federal D. Glover, District V
Supervisor
Contact: L. DeLaney,
925-335-1097
I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on
the date shown.
ATTESTED: November 17, 2015
David J. Twa, County Administrator and Clerk of the Board of Supervisors
By: June McHuen, Deputy
cc:
D. 7
To:Board of Supervisors
From:LEGISLATION COMMITTEE
Date:November 17, 2015
Contra
Costa
County
Subject:Legislative Policy Referral Regarding Pension Reform
BACKGROUND: (CONT'D)
B)
The Report attempts to address the question "Why have the County's retirement obligations grown so large?," and
suggests as one of its reasons "… the County has not negotiated reductions in future pension benefits for current
employees through collective bargaining because of obstacles arising from highly inflexible court decisions
unique to California and a minority of other states." (p. 7, B)
The Report states that "...the California Supreme Court has issued rulings that severely restrict the ability of the
County to make changes to benefits not yet earned under its pension plans." It cites Allen vs. City of Long Beach,
decided by the Supreme Court in 1955, as an example of a case that removed tools that would have allowed the
County to manage and adjust its pension obligations. "That case held that not only was a public employer
prohibited from terminating a pension plan for current employees; it must also assure that any alterations in the
pension plan "which results in disadvantage to employees should be accompanied by comparable new
advantages." This meant that after the Allen case public employers in California were on a one-way legal elevator
that only went up. In contrast to wage and other employee benefits, any pension benefit granted to a current
employee could not be reduced in future periods even though such benefits had not yet been earned." (p. 10, B )
The Report further posit that public agencies in California have adopted the view that the "vested pension contract
right the Court found in the Allen case could not be challenged by collective bargaining." However, the Report
questions that assumption suggesting that "collective bargaining [the Meyers-Milias-Brown Act was passed in
1968] did not exist for public employees at the time the Allen case was decided [in 1955]." (p. 11, B)
The Report also contends that the California Supreme Court based its decision in the Allen case on the contracts
clause of both the California and the U.S. Constitutions, but "nothing in that prohibition [that prohibits California
from passing laws that impair contract obligations] prevents the party to whom the contract obligation is owed
from agreeing voluntarily to amend or waive that obligation." The Report suggests that "Federal courts would
have the final say on whether the U.S. Constitution extends the same protection to future, unearned pension rights
that the California Supreme Court found in its Allen decision." (p. 11, B )
The referral of these legislative and legal policy issues was considered at the October 1, 2015 meeting of the
Legislation Committee (comprised of Supervisor Mitchoff, in Supervisor Glover’s absence), receiving
information and testimony from Mr. Michael Moore, a member of the 2015-16 Civil Grand Jury and an attorney.
Supervisor Mitchoff indicated that the Board of Supervisors appreciated receiving the Grand Jury’s
recommendations. Supervisors have negotiated pension benefits in the past with employee unions, however, with
the California Public Employees' Pension Reform Act (PEPRA) in effect, it was Supervisor Mitchoff’s opinion
that there was no incentive for pre-2013 employees to negotiate on pension changes. The Committee directed staff
to return the item to the full Board of Supervisors for consideration, with no recommendation from the Committee
to pursue a legislative or legal remedy at this time.
Mr. Michael Moore has requested time to present additional information to the Board and will be in attendance at
the meeting.
Pension Reform Efforts
While these legal questions remain unresolved, California’s public employee pensions could potentially be
decided at the ballot box. A group of pension reform advocates, led by former San Jose Mayor Chuck Reed and
former San Diego Councilman Carl DeMaio, had filed a statewide initiative for the 2016 ballot, called the “Voter
Empowerment Act of 2016,” which would have amended the state constitution to require voter approval of any
new defined benefit retirement plans or pension increases and place a 50 percent cap on government subsidies of
retirement benefits provided to government employees. The proposed state constitutional amendment would have
applied to all public employee pensions throughout the state. However, it was withdrawn from circulation and
rewritten by its two sponsors.
The new approach to a pension reform initiative comes in the wake of allegations of bias against Attorney General
Kamala Harris in crafting the official title and summary for the initiative. Attorney General’s summary stated
“Eliminates constitutional protections for vested pension and retiree health care benefits for current public
employees.” The sponsors contend that their initiative stated the government “shall not enhance the pension
benefits of any employee in a defined benefit pension plan unless the voters of that jurisdiction approve,” and that
“shall not enhance” is not the same thing as “eliminates,” which has a more negative connotation.
From the Sacramento Bee:
“The idea, DeMaio said, was to see whether Democratic Attorney General Kamala Harris used what they consider
"poison pill" language to describe the new measures as she has three previous pension change proposals since
2011. If she does, DeMaio said, "we think she'll be giving us the evidence we need" to successfully sue Harris for
unfairly skewing her description of pension initiatives.
The attorney general's office writes the short title and summary of all ballot initiative proposals. The language is
important because it appears on petition materials used to qualify them for the ballot, often shaping voters' first
impression of an initiative's contents. Perhaps even more important, the wording affects potential contributors'
willingness to underwrite a campaign. …
Harris, who is running for U.S. Senate, has been accused of employing poll-tested language about previous
pension measures to make them as politically unpalatable as possible. In 2014, Reed took Harris to court, alleging
she described a pension measure he proposed with "false and misleading words and phrases which argue for the
measure's defeat, is argumentative, and creates prejudice against the measure, rather than merely informing voters
of its chief purposes and points ..."
The courts ruled against Reed. Harris' representatives have said throughout that she has fairly characterized the
pension measures that came across her desk. They say claims of bias are commonly leveled at attorneys general
writing titles and summaries.[1]”
The new initiative effort comes after courts have struck down recent attempts to address the pension problem.
Last year, voters in Ventura County collected thousands of signatures for a measure that would have allowed the
County to opt out of the current defined-benefit system and replace it with a 401(k)-type system, but a county
judge ruled that residents could not vote to leave a pension system created by the state.
In 2012, San Jose voters overwhelmingly approved a measure that would have given city employees a choice
between a less-generous pension or staying in the current system but contributing a larger portion of their salaries
toward paying down the pension debt. A Santa Clara County Superior Court Judge overturned that measure for
violating the “vested rights” of public employees.
[1] Oct. 2, 2015, by Jon Ortiz.
http://www.sacbee.com/news/politics-government/the-state-worker/article37401864.html
CONSEQUENCE OF NEGATIVE ACTION:
If the Board of Supervisors does not accept this report, it will not have received the input of the Legislation
Committee on the referral.
ATTACHMENTS
Attachment A
Attachment B
Attachment C
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
Attachment B
RECOMMENDATION(S):
APPROVE the response to Civil Grand Jury Report No. 1503 "Time for a New Look at
Pension Costs" and DIRECT the Clerk of the Board to forward the response to the Superior
Court no later than August 15, 2015.
FISCAL IMPACT:
No fiscal impact.
BACKGROUND:
On May 18, 2015 the 2014/15 Civil Grand Jury filed the above-referenced report. The
attached response clearly specifies:
Whether a finding or recommendation is accepted or will be implemented; if a
recommendation is accepted, a statement as to who will be responsible for implementation
and by what target date; a delineation of the constraints if a recommendation is accepted but
cannot be implemented within a six-month period; and the reason for not accepting a
finding or recommendation.
APPROVE OTHER
RECOMMENDATION OF CNTY
ADMINISTRATOR
RECOMMENDATION OF BOARD
COMMITTEE
Action of Board On: 07/28/2015 APPROVED AS RECOMMENDED OTHER
Clerks Notes:See Addendum
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Candace Andersen, District II
Supervisor
Mary N. Piepho, District III Supervisor
Karen Mitchoff, District IV Supervisor
ABSENT:Federal D. Glover, District V
Supervisor
Contact: Lisa Driscoll, County Finance
Director (925) 335-1023
I hereby certify that this is a true and correct copy of an action taken and entered
on the minutes of the Board of Supervisors on the date shown.
ATTESTED: July 28, 2015
David J. Twa, County Administrator and Clerk of the Board of
Supervisors
By: June McHuen, Deputy
cc: Jeff Carman, Chief CCCFPD
D. 8
To:Board of Supervisors
From:David Twa, County Administrator
Date:July 28, 2015
Contra
Costa
County
Subject:Response to Civil Grand Jury Report No. 1503 "Time for a New Look at Pension Costs"
Attachment A
The Board of Supervisors is required to respond to Findings 1-7 and Recommendations 1-3.
The Board of Directors of the Contra Costa County Fire Protection District is required to
respond to Findings 1, 2, 4, 6 and Recommendations 1-3. Please see the attached combined
response to the report.
Attachment A
CONSEQUENCE OF NEGATIVE ACTION:
In order to comply with statutory requirements, the Board of Supervisors/Board of
Directors for the Contra Costa County Fire Protection District must provide a response to
the Superior Court no later than August 15, 2015. The Board must take timely action in
order to comply with the statutory deadline.
CHILDREN'S IMPACT STATEMENT:
Not Applicable.
CLERK'S ADDENDUM
Speakers: Frank Darling, resident of Orinda; Vincent Wells, President Firefighters'
Local 1230; David Van Etten, resident of Lafayette.
APPROVED the response to Civil Grand Jury Report No. 1503 "Time for a New Look
at Pension Costs"; REFERRED the matter in relation to legislative policy to the
Legislative Committee; DIRECTED the Clerk of the Board to forward the response to
the Superior Court no later than August 15, 2015; and DIRECTED the concept of a
establishing a task force/committee to review options to reduce the pension obligation
burden be revisited in one year.
ATTACHMENTS
Grand Jury Report No. 1503
Response to Grand Jury Report No. 1503
Attachment A
1
BOARD OF SUPERVISORS AND BOARD OF DIRECTORS OF THE CCCFPD
RESPONSE TO CONTRA COSTA COUNTY GRAND JURY REPORT 1503:
Time for a new Look at Pension Costs
Findings:
F1. The County and CCCFPD currently have unfunded accrued pension and OPEB liabilities
that exceed $2.6 Billion. The cost to the County and CCCFPD to cover these and
additional annual pension and OPEB liabilities require payments in excess of $375
Million each year.
Response: The respondents agree with the finding.
F2. Pension costs alone now consume over 11% of the combined budgets of the County and
CCFPD. These costs have risen from a percentage slightly under 5% in 2000 and now
constitute the largest financial challenge facing the County.
Response: The respondents partially disagree with the finding. Although pension costs
are large, the largest financial challenge facing the County is the issue of balancing the
cost of salaries and benefits as components of total compensation to attract and retain
employees.
F3. The cost of pension and OPEB obligations are debts that must be paid before the County
can allocate available resources to other needs and services. This has contributed to the
"crowding out" of other County services, the deferral of needed building maintenance
projects, and the postponement of needed system improvements for the County.
Response: The respondent partially disagrees with the finding. Other Post Employment
Benefits (OPEB) liabilities are not ‘debts’. Unlike pension liabilities, OPEB liabilities
can be reduced rather than paid. In 2006, the County’s OPEB liability was in excess of
$2.6 billion. The liability is currently under $1 billion and was reduced by reducing the
benefit, not paying the liability.
F4. Pension costs are difficult to manage because they vary directly with the investment
results obtained by CCCERA on its pension funds. The County and CCCFPD are at risk
each year of having to increase pension payments in the event CCCERA does not achieve
its 7.25% assumed rate of investment return on the pension fund.
Response: The respondents agree with the finding.
F5. The County faces competitive pressures in retaining and recruiting a skilled and
professional workforce. This limits its ability to seek greater contributions from its
employees to the costs of the pension and OPEB obligations because other counties and
cities may not seek the same contributions from their employees.
Response: The respondent agrees with the finding.
Attachment C
2
F6. The County and CCCFPD have a severe handicap in reducing their pension obligations
because of a highly inflexible rule under a long-standing California court precedent that the
County believes severely limits their ability to negotiate reductions in future, unearned
pension benefit rates with their current employees.
Response: The respondents agree with the finding.
F7. The County has not taken steps to challenge or change the California legal rule on changes
to future pension benefits for existing employees, whether through the initiative process,
clarifying legislation, or friend of the court legal briefs.
Response: The respondent agrees with the finding.
Recommendations:
R1. The County Board of Supervisors and the Board of Directors of CCCFPD should
establish a task force to review all options available to reduce the burden of the County
and CCCFPD's pension obligations, including efforts to bring about a reform in
California public pension law. The task force should:
• Confirm with the County's or CCCERA's actuaries what level of potential
savings in pension costs could be achieved through negotiations with employees
hired before 2013 for reductions in pension benefits for future employment
periods.
• Review with qualified legal counsel what strategies are available to seek a change
or clarification in California law to assure changes to future pension benefits for
current employees are proper subjects of collective bargaining. Such strategies might
include participation in a state ballot initiative, the filing of "friend of court" legal
briefs, sponsoring clarifying language for the Meyers- Milias-Brown Act, or
including changes to future pension benefits for current employees as a subject for
collective bargaining negotiations.
• Recommend what limits the Boards should establish as a matter of policy on any
such reductions in future pension benefits for current employees, such as a
minimum benefit tied to PEPRA rates as set forth in this report.
• Recommend a policy for keeping the County's and CCCFPD's employee groups
informed of the Boards' intentions on any strategies for change so as to assure
employees that any changes would be subject to collective bargaining and minimums
set forth in the Boards' minimum benefit policy.
• Recommend a policy for keeping County citizens fully informed of the
potential costs of any changes in pension benefits negotiated with the County's
and CCCFPD's employee groups.
Response: The recommendation will not be implemented at this time. Although neither the
County nor the District are opposed to such a mission, the County and Fire District are
Attachment C
3
currently in negotiations with the majority of bargaining groups to restructure delivery of
healthcare to employees. It is reasonable to believe that the result will impact competitive
pressures in retaining and recruiting a skilled and professional workforce. Additionally, the
District is in the midst of a significant restructuring of delivery of ambulance services.
Neither the County nor the Fire District are currently in an administrative position to take on
such an undertaking.
R2. The task force should be formed within 90 days and be required to report back to the
Boards with its recommendations within 90 - 120 days.
Response: The recommendation will not be implemented. See response to recommendation
R1.
R3. Establish a special web page on the County web site where citizens can easily track by
means of a pension "dashboard" the costs and size of the County's and CCCFPD's
pension obligations and the progress on its plans to reduce their costs.
Response: The recommendation will not be implemented at this time. The County and
District’s Budget and CCCERA’s web sites include annual updates of pension obligation and
funding process. The obligation changes are calculated annually, which does not warrant a
web page “dashboard”, which is more suited for launching applications quickly for items that
change often such as a stock ticker or weather report. The County’s current pension
information page is three clicks from the main menu and CCCERA’s is two clicks from the
main menu. Should the County and/or District undertake an effort to reform California public
pension law in the future, such a “dashboard” could be utilized to keep employees and the
public apprised of the progress on its plans to reduce costs.
Attachment C