CITY OF DOWNEY v. BOARD OF ADMINISTRATION Docket No. 44526.
47 Cal.App.3d 621 (1975)
121 Cal. Rptr. 295
CITY OF DOWNEY et al., Plaintiffs and Appellants, v. BOARD OF ADMINISTRATION, PUBLIC EMPLOYEES' RETIREMENT SYSTEM, Defendant and Respondent.
Court of Appeals of California, Second District, Division Four.
April 24, 1975.
Burke, Williams & Sorensen and Mark C. Allen, Jr., for Plaintiffs and Appellants.
Evelle J. Younger, Attorney General, and Melvin R. Segal, Deputy Attorney General, for Defendant and Respondent.
The appellants are the Cities of Downey and Glendora, as well as two individuals employed by Downey, an employee of Glendora, and an employee of the City of Santa Monica. This litigation revolves around the effect of certain legislation (Stats. 1971, ch. 170) amending the Public Employees' Retirement Law (Gov. Code, §§ 20000-21500.)
The municipal appellants urge that the 1971 amendments had the effect of giving or lending their credit to the state and to other contracting agencies under the retirement law, in violation of former section 25, article XIII, of the California Constitution.
Downey, a charter city, likewise argues that the amendment violates the home rule powers conferred upon it pursuant to article XI, section 5, of the Constitution.
The trial court found against these contentions. We agree and affirm the judgment.
Under the retirement law, municipal corporations may participate in and make their employees members of the system by entering, in a prescribed manner, into a contract with respondent Board of Administration (hereafter "board").
Pursuant to stipulation the court made a number of findings concerning the method under which the system formerly operated, the way it has operated since the 1971 amendments, and the changes resulting in the rights and obligations of the individuals.
With respect to the way the system formerly operated the court found that each employee of the state and of each contracting agency had an account. The funds paid into the system by each employee were actuarially computed to fund a portion of the benefits the employee would receive on retirement and were credited to his account, with interest. The state itself and each contracting agency had separate accounts for its contributions toward the retirement benefits for its
The findings concerning the way the system had operated also set forth 13 instances, between 1943 and 1970, in which amendments to the act provided increased benefits to all employees of the state and all contracting agencies. Sometimes increased benefits were provided only to employees of contracting agencies which accepted the amendment and agreed to increase the percentage of payroll contribution made by them.
Under the 1971 amendment, the court found, the system operated as follows. Employees of the state and the contracting agencies no longer contributed on the basis of an individual actuarial computation of a portion of the benefits each will receive. Rather, all employees contributed (subject to certain adjustments not material here) a flat 7 percent of their salaries. The employee's account was maintained intact. The system no longer maintained a separate current account for the state and for each contracting agency. Contributions by the state and each agency for their miscellaneous employees
The court also found that the 1971 amendments increased Ferris' rate of contribution and the retirement allowance which he would receive upon retirement at various assumed ages, reduced his mandatory retirement age from 70 to 67 and changed the optional benefit which his spouse will be eligible to receive. A similar effect resulted with respect to each of the other individual appellants, except that Shand's rate of contribution was decreased rather than increased.
The court then made findings concerning the legislative history of chapter 170 of the 1971 statutes. They need not be recited except to state that among the objectives of the legislation, reflecting varying viewpoints of the California State Employees' Association, on the one hand and the administration on the other hand, was an improvement in the amount of retirement benefits and a mandatory reduction in the retirement age.
Concerning the effect of the amendments the court found that the merger of the assets and liabilities of Downey and Glendora with those of the state and other contracting agencies for the purpose of determining the rate of contribution by the two cities will not necessarily increase the rates. The rates will increase or decrease depending on the experience of the cities as compared with the group average. Further findings were that only future experience could determine whether actuarial deficiencies of the cities were changed by the merger of the accounts; and that such deficiencies are not current monetary deficiencies, do not represent an imbalance between existing liabilities and assets and do not constitute presently payable benefit payments. Glendora, Downey and Santa Monica were found to have consented by contract to accept mandatory changes in the retirement law. Another finding was that the cities will not be required to pay retirement expenses of state
The 1971 Legislation Does Not Give or Lend the Credit of Contracting Agencies in Violation of the Constitution
Article XVI, section 6, of the Constitution (fn. 2, supra) provides that the Legislature has no power to give or lend the credit of any city to any municipal corporation nor to pledge such credit for the payment of the liabilities of any municipal corporation.
Appellants recognize that this provision does not prohibit the payment of pensions, since they are not a gift of public funds, even when granted retroactively on account of the services of a pensioner already retired. (Sweesy v. L.A. etc. Retirement Bd. (1941) 17 Cal.2d 356, 359-362 [110 P.2d 37].) They argue that the 1971 legislation lent the credit of Downey and Glendora to the state and other cities because (1) the administration of the system with the merged accounts, and merged assets and liabilities will in the future require them to pay a portion of the costs of the retirement benefits of the miscellaneous employees of the state and of other contracting agencies; and (2) by increasing the value of some retirement benefits without their concurrence and by reducing some employee contributions the Legislature thereby gave and lent the cities' credit to their employees. They cite Veterans Welfare Board v. Jordon (1922) 189 Cal. 124 [208 P. 284, 22 A.L.R. 1515], a case which stated that the constitutional provision should be liberally construed.
Appellants argue that no evidence supports the court's findings to the effect that the merger of the accounts did not result in requiring Downey and Glendora to pay expenses of other agencies. The evidence did, however, show that it was speculative whether the merging of accounts would or would not favor any particular contracting agency.
The Home Rule Provisions Were Not Infringed
Appellants urge that chapter 170 of the 1971 statutes is invalid with respect to employees of the chartered cities of Santa Monica and Downey.
The provisions of chapter 170 do not conflict with local regulation,
The appellants urge nevertheless that allowing the state to control the provisions of the administration of the retirement law through subsequently enacted legislation involves an invalid delegation of legislative authority by the charter cities, since the Constitution gives them plenary power over their municipal affairs.
"Only in the event of a total abdication of [legislative] power, through failure either to render basic policy decisions or to assure that they are implemented as made, will [a] court intrude on legislative enactment because it is an `unlawful delegation,' and then only to preserve the representative character of the process of reaching the legislative decision." (Id. at p. 384.) Accordingly, Kugler upheld the validity of an ordinance of the chartered City of Alhambra which provided that police and fire salaries should be computed in an amount equaling an average of the salaries for comparable purposes paid to members of the Los Angeles City and County Fire Departments.
Martin v. County of Contra Costa,
The charter provisions making applicable present and future provisions of the retirement law also have built-in safeguards. They include the right of contracting agencies to withdraw from the system and, as noted above (fn. 5, supra), the right of the cities to, in effect, revert to the pre-1971 method of accounting adopted by the board. Further, any delegation by the cities is, anomalously, to the Legislature which is the body regarded as the most representative organ of government and to which legislative determinations are normally assigned. (Clean Air Constituency v. California State Air Resources Bd.
For all these reasons chapter 170 of the 1971 statutes withstands the constitutional attack that it violates the home rule provisions of the Constitution.
The 1971 Legislation Does Not Infringe the Rights of the Individual Appellants
For the same reasons discussed above concerning the municipal appellants, there is no merit to the contention advanced by the individuals employed by Santa Monica and Downey that only their employer, and not the Legislature, could make changes in the rates of their retirement contributions. The home rule provision, as we have noted, does not so operate in this case.
This leaves for discussion the contentions of all of the individual appellants that the changes brought about by the 1971 statute unconstitutionally impaired the obligation of their respective contracts of employment. We disagree.
In Kern v. City of Long Beach, supra, the court said: "Thus it appears, when the cases are considered together, that an employee may acquire a vested contractual right to a pension but that this right is not rigidly fixed by the specific terms of the legislation in effect during any particular period in which he serves. The statutory language is subject to the implied qualification that the governing body may make modifications and changes in the system. The employee does not have a right to any fixed or definite benefits, but only to a substantial or reasonable pension. There is no inconsistency therefore in holding that he has a vested right to a pension but that the amount, terms and conditions of the benefits may be altered." (29 Cal.2d at p. 855.)
The most obvious disadvantage is that, with the exception of appellant Shand, there was an increase in the rate of contribution of each employee to the system. Offsetting this, however, is the increase in the amount of retirement allowance which each employee, including Shand, will be entitled to receive, as compared to the amount which would have been payable prior to the 1971 legislation. There is no disadvantage at all to Shand.
The only other change in the individual appellants' rights which the court found to have been caused by the 1971 amendments to the retirement law was that the spouses of the employees will be eligible to receive, at their option, a monthly allowance in the amount of one-half of the employee's allowance upon his death before retirement (and after he attains eligibility to retire) in lieu of her entitlement to a lump sum amount equal to the employee's accumulated contribution plus one-half of the annual compensation in the year preceding death. Such a change is one which seems advantageous. (See, Speight v. Million,
The judgment is affirmed.
Kingsley, Acting P.J., and Dunn, J., concurred.
Appellants' petition for a hearing by the Supreme Court was denied June 19, 1975.
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