State Supreme Court rules San Diego skipped key legal step in taking pension reform to voters

The California Supreme Court ruled Thursday that San Diego’s six-year-old pension cutbacks were not legally placed on the ballot because city officials failed to negotiate with labor unions before pursuing the measure.

The ruling, which could cost the city millions, overturned an appeals court ruling last year that had upheld the cuts.

The state high court ordered the appeals court to take the case back and evaluate the state labor board’s conclusion that 4,000 employees hired since pensions were eliminated must receive compensation that would make them financially whole.

While the unanimous ruling stopped short of reversing the cuts, it essentially ordered the appeals court to invalidate the ballot measure that imposed those cuts.

The ruling directs the appeals court to enact “an appropriate judicial remedy” for the city’s failure to follow the legally required steps before placing the measure on the ballot.

The only way to do that, attorneys for the city’s labor unions said, would be to invalidate the ballot measure and nullify the pension cuts.

The ruling vindicates claims by city labor unions that then-Mayor Jerry Sanders needed to engage in labor negotiations before pushing Proposition B onto the ballot in 2012.

The measure, which was approved by more than 65% of city voters, replaced guaranteed pensions with 401(k)-style retirement plans for all newly hired city employees except police officers.

Sanders maintained he supported the measure only as a citizen, not as mayor, and therefore negotiations with unions weren’t required.

The Supreme Court disagreed, concluding Sanders was obligated to meet with the unions before placing the measure on the ballot because he used his power and influence as mayor to support the measure.

“Sanders supported the signature-gathering campaign,” the court said in the ruling, which was written by Justice Carol Corrigan. “He touted its importance in interviews, in media statements and at speaking appearances.”

Sanders said in a telephone interview Thursday that his actions were based on legal advice he received, and that he still doesn’t believe he acted improperly. But he also said he should have handled things differently.

“If I had it to do all over again — and if I had better advice — we probably would have done meet and confer” labor negotiations, he said.

San Diego is the only city in California to discontinue pensions for new hires, so the ruling could have an impact across the state as other city and county governments consider pension cuts and how they can be legally enacted.

In Thursday’s ruling, the state Supreme Court emphasized that it wasn’t taking a position on pension cuts.

“We are not called upon to decide, and express no opinion, on the merits of pension reform or any particular pension reform policy,” the ruling said.

The ruling reinstates a 2015 decision by the state labor board that concluded the city was legally required to conduct labor negotiations before placing Proposition B on the ballot.

In that decision, the labor board ordered San Diego to make employees hired since 2012 whole by compensating them for the loss of pensions and paying them interest penalties of 7%. Estimates of how much that would cost the city have ranged from $20 million to $100 million.

The labor board, formally known as the Public Employment Relations Board, couldn’t invalidate the ballot measure because that power is reserved for state courts.

Supporters of Proposition B issued news releases Thursday saying that the Supreme Court’s ruling didn’t invalidate the measure or reverse the pension cuts.

Ann Smith, an attorney for the Municipal Employees Assn. labor union, countered in a telephone interview that those supporters are misreading the ruling.

“The Supreme Court is telling the appeals court you should add the judicial remedy of invalidation because that’s the only outcome that’s consistent with the Supreme Court’s binding conclusion that the city violated the law,” she said.

Courts, however, have typically been reluctant to nullify ballot measures that are citizens’ initiatives.

In a statement, San Diego Mayor Kevin Faulconer said the ruling leaves Proposition B in place until the appeals court acts.

“San Diego pension reform remains the law of the land and today’s Supreme Court decision keeps Proposition B in full force and effect,” he said. “My administration will work closely with the city attorney’s office on the direction provided by the Supreme Court.”

Garrick writes for the San Diego Union-Tribune.