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SONOMA COUNTY ILLEGAL PENSION INCREASE LAWSUIT FILED

On August 28, 2017 George Luke a retired trial attorney filed a petition for writ of mandate and declaratory relief from the pension increases that were implemented in 2003 by the Sonoma County Employee Retirement Association. Here are the laws violated and the issues he raised:

Laws requiring public notification of the future annual cost of any pension increase were never followed, even minimally.

There are 3 California Government Code Sections that set out the statutory requirements for the Retirement Association and the Board of Supervisors to follow to legally increase retirement benefits.

 

Section 31515.5 of the California Government Code requires the Board of Supervisors to make public at a regularly scheduled meeting of the board all salary and benefit increases. The notice is required to be included on the agenda for the meeting as an item of business.

Section 31516 of the California Government Code requires the Board of Supervisors to secure the services of an enroll actuary to provide a statement of the actuarial impact upon future annual costs before authorizing any increase in retirement benefits. The future annual costs are required to be made public at a public meeting at least two weeks prior to the adoption of the increase.

Section 7507 of the California Government Code requires the legislative body (in a county’s case the board of supervisors) to secure the services of an enrolled actuary to provide a statement of the actuarial impact upon the future annual costs before authorizing increases and states the future annual costs be made public two weeks prior to the adoption of any increase.

The California Employee Retirement Law requires the board of supervisors to enact by majority vote a board resolution adopting new retirement benefit formulas.

 

Issue 1: The pension increase was not enacted by a Sonoma County Board of Supervisors resolution following statutory requirements.

In May of 2003, the Sonoma County Employee Retirement Association (SCERA) Board negotiated the settlement of a lawsuit brought by various employee groups that included an increase in pension formulas. The problem is SCERA does not have the authority under the law to increase pension formulas, only the supervisors can do that and only after they have satisfied their statutory requirements to notify the public.

Issue 2: The current Sonoma County pension benefits due to the illegal retroactive pension increases have led to service insolvency with little or no money available to maintain roads and County buildings.

Annual pension costs have grown over 500% from $20 million in 2001 to $113 million in 2016. In addition, during this same period the unfunded liability grew by an average of $55 million per year from $10 million in 2001 to $831 million in 2015.

Also, according to the Retirement Association’s financial statements from 2001 to 2016 the pension fund has suffered $1.1 billion in actuarial losses, an average of $68 million per year.

Issue 3: The illegal pension increases caused inequality in the system. The older pre increase retirees have lost their COLA and new employees hired after 2013 are required to pay 3% of their salaries for a pension increase they will not receive.

Issue 4: The contracts state the employees are required to pay for the increase but the pension formula increase added more to pension costs than the Retirement Association’s actuary predicted and caused employees to retire an average of 5 years earlier.

Issue 5: The Human Resources Department ignored the Board of Supervisors request for them to adjust pension contributions during the 2012 contract negotiations to comply with the agreement for the employees to pay for the increase. Here is the directive from the report:

“The Ad Hoc Committee recommends staff commission a new calculation to identify the shortfall, if any, and to work with the labor organizations through negotiations to meet the intent of the prior agreements regarding the enhanced benefit formulas costs”.

Issue 6: The Retirement Association Plan Administrator, County Auditor/Controller, County Counsel and Deputy County Counsel defended and participated in a settlement that included benefits formula increases they are not allowed to implement and used their position to enrich themselves in violation of state conflict of interest laws outlined in Section 1090 of the California Government Code.

Issue 7: The current Board of Supervisors are aware that the increases were not legally enacted, employees are not paying for the increase as agreed, and therefore should not make any more payments to the pension fund until these violations of the law and failure to meet the Board Resolutions to have the employees pay for the increase are resolved.

Issue 8: The County responded to our complaint to the Civil Grand Jury by having County Counsel Bruce Goldstein and the County Counsel’s office respond instead of hiring an outside independent person or firm to investigate and make recommendations for remedies. The County Counsel’s Office headed by Bruce Goldstein should have recused themselves because he and all department employees benefited from the pension increase.

Issue 9: Shall is mandatory, not directory.

One of the County Counsel’s office main arguments in the response to the Grand Jury was the word “shall” as used in government code 7507 could be considered directory and not mandatory. However, the California Government Code in Article 13 as well as the County’s own ordinance state in their definitions section that “shall is mandatory, may is permissive”.

Issue 10: There was not substantial compliance with the law as County Counsel asserted in his response to the Sonoma County Civil Grand Jury in fact there was no compliance.

Issue 11: County Counsel claimed the Consent Decree in the Ventura Settlement could be legally used to increase pensions, but the lawsuit was over what was considered pensionable and SCERA can change what is considered pensionable pay under the law. But the settlement included new enhanced pension formulas that can only be enacted by the Board of Supervisors through a legislative process and board resolution.

 

Here is a link to the full text of the lawsuit:
George Luke Vs. Sonoma County

Here is a link to the exhibits of the lawsuit:
George Luke Vs. Sonoma County Exhibits

Here is the article that appeared in the Press Democrat:
http://www.pressdemocrat.com/news/7471405-181/lawsuit-targets-enhanced-pension-benefits?artslide=0