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A lawsuit over county pension-sharing could have bigger implications

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On the list of bad things that could happen to you, having your lawyer sue you is probably near the top. If you’re a government agency these days, having your employees take you to court over pension cost-sharing probably isn’t fun, either.

For more than two years, San Luis Obispo County has been fighting its own lawyers over pensions.

To date, the county has spent more than $230,000 on outside counsel to fight a lawsuit brought by the San Luis Obispo Government Attorneys’ Union (SLOGAU) and Deputy County Counsel Association, as well as on outside counsel for a fight the county started over the same issue in front of the California Public Employment Relations Board (PERB).

The county filed two cases with the PERB in November 2010, though they can be logistically viewed as a single case. Both cases have gone through two hearings and are scheduled for a final hearing on June 11.

“Our belief is that the dispute has to be resolved at PERB and not in superior court,” said County Counsel Warren Jensen, who, as management, isn’t part of the county counsel’s union.

On the court side of things, the SLOGAU and DCCA are preparing for trial in Santa Maria. The case was moved outside SLO County because of the conflict it poses to local judges. Still, the court proceedings are carrying on as scheduled.

Both cases revolve around how the county and its employees share increases to pension costs. The big thing to pay attention to here isn’t so much the specific cases, but the effect they’ll have on future county labor negotiations.

“If the unions were to prevail, the Board [of Supervisors’] 50/50 pension cost-increase-sharing plan that we have negotiated with almost all of the bargaining units would crumble going forward,” Human Resources Director Tami Douglas-Schatz said in an e-mail.

County attorneys say they shouldn’t have to negotiate pension-rate increases with the county, arguing that those decisions should instead be made by the county’s Pension Trust Board of Trustees. The county, on the other hand, contends it should be able to bring pension-rate increases to the bargaining table, which it’s done before with other labor groups.

As county officials continue to patch their wounds as part of a seven-year budgetary pain plan (they’re on year five and have so far reduced annual budget deficits by tens of millions of dollars), they’ve worked with labor groups to stem increasing pension costs. Most notably, members of the San Luis Obispo County Employees’ Association (SLOCEA) worked out a deal to split a previous pension increase 50/50. But it’s far from permanent, and when SLOCEA members go back to the bargaining table this year, they’re not bound to share any future cost increases.

The county has saved $8 million per year with the sharing plan, Douglas-Schatz said.

But that could all change. County officials argued to PERB that its attorneys bargained “in bad faith” by not discussing how to split pension costs. In reality, the attorneys outright refused to bargain over pension increases, because they say they shouldn’t have to under county rules.

Their lawyer, Santa Monica-based Steve Silver, said county attorneys even offered to take a pay cut that would have offset the pension increases for the county.

“So this isn’t about money,” Silver told New Times. “Because we’ve offered them more than they’ve saved. It’s about honoring your pension plan, complying with the law.”

He went on: “I represent public employees throughout the state; every 10 minutes throughout my work life I hear the words pension reform … it’s all political.”

There might be more to it than politics. The county’s pension fund is expected to continue a slumping trend over the next few years, according to the 2011 Actuarial Valuation. Even under the most optimistic scenario, the pension isn’t expected to bottom out until 2018, when the $1.49 billion (with a “b”) retirement pool will have an unfunded liability of about $440 million.

Executive Secretary Tony Petruzzi said the county has managed to pull its investments out of a historical rut—it’s now performing above the 50-percentile group—and the pain is spread out over such a long period it isn’t as alarming as the big numbers might suggest.

“We’re gradually adjusting the profile of this thing to get it to where it ought to be,”
he added.

On May 21, the county’s Pension Trust Board of Trustees did just that: Based on a review of the last five years of pension investments, a consultant told trustees there need to be some adjustments to assumptions built into the fund. Under the new recommended assumptions, the county would have to increase pension costs by 2.17 percent—the type of number that makes pension experts go all queasy, especially when county employee groups seem to be reaching their limits.

“At a time when there’s already no money, I don’t want to make it worse on the employees,” SLOCEA General Manager Kimm Daniels told the trustees.

She noted that SLOCEA members have foregone three years of pay increases to prevent layoffs.

Ultimately, pension trustees voted to tweak and lower some assumptions based on the consultant’s report, which will equate to a .43 percent increase in pension costs.

Now it will be a matter of determining who takes on that increase, and it will all depend on who wins in the battle between SLO County and its attorneys.

News Editor Colin Rigley can be reached at crigley@newtimesslo.com.

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