US - Orange County, California has lost its appeal of a lower court's ruling that a 2001 retroactive increase in retirement benefits for the county's deputy sheriffs didn't violate the state's constitution.
The California appeals court in Los Angeles, in a unanimous decision today, upheld the 2009 finding by a judge that the retroactive part of an enhanced formula for calculating the deputy sheriffs' retirement benefits didn't violate a California prohibition against municipalities increasing their debt or liabilities without voter approval.
Orange County sued the board of the county's retirement plan in 2008, saying the retroactive part of the 2001 increase, approved by the county's board of supervisors then in office, was unconstitutional. Under the changed formula, the deputy sheriffs are entitled to 3%, instead of 2%, of their final compensation for each year they worked when they retire at the age of 50.
The enhanced formula also applies to years they worked before 2001. The county claims its former board of supervisors created a $100m liability with the past-service part of the enhanced retirement benefits that has since grown to about $187m.
"The county emphasises its current difficult financial situation and the ‘ruinous fiscal irresponsibility' of the prior board of supervisors," the appellate panel said. "Imprudence, however, is not unconstitutional."
The 50% retroactive pension-benefit increase turned a fully funded pension fund into one that is only two-thirds funded and created an enormous amount of debt for the county, John Moorlach, vice chairman of Orange County's board of supervisors, said today in a telephone interview.
"We always assumed that this may go to the Supreme Court level and we hope that is a venue that might be available to us," Moorlach said. "This has to be resolved."
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