Court Opinion

ID: 9537617
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:20:28.882946+00
Date Added: 2024-06-11T14:56:49.698426
License: Public Domain

BIRD, C. J.
I respectfully dissent.
The 40 percent increase in safety members’ rates of contribution to the City of San Diego (City) retirement fund violates the contract clauses of the federal and state Constitutions. (U.S. Const., art. I, § 10; Cal. Const., art. I, § 9.) Each safety member has a vested contractual right to contribute to the pension system at the rate established upon his acceptance of employment. This rate may be raised only if: (1) such an increase is necessary for the system’s continued viability; and (2) safety members are afforded a commensurate increase in benefits. Since neither of these conditions has been met, the trial court was correct in holding that the plaintiff members should be refunded any monies collected pursuant to this illegal increase.
In Betts v. Board of Administration (1978) 21 Cal.3d 859, 863 [148 Cal.Rptr. 158, 582 P.2d 614], this court noted that “[a] long line of California decisions” has settled the constitutional principles applicable to public employees’ pension rights. “The pension provisions of a city charter are an indispensable part of the contract of employment between a city and its employees, creating a right to pension benefits as an integral part of compensation payable under such contract, which vests upon acceptance of employment.” (Abbott v. City of San Diego (1958) 165 Cal.App.2d 511, 517 [332 P.2d 324], Accord Kern v. City of Long Beach (1947) 29 Cal.2d 848, 852 [179 P.2d 799]; Dryden v. Board of Pension Commrs. (1936) 6 Cal.2d 575, 579 [59 P.2d 104].)
Nonetheless, once vested, pension rights may still be modified. “An employee’s vested contractual pension rights may be modified prior to retire*307ment for the purpose of keeping a pension system flexible to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system. [Citations.] Such modifications must be reasonable, and it is for the courts to determine upon the facts of each case what constitutes a permissible change.” (Allen v. City of Long Beach (1955) 45 Cal.2d 128, 131 [287 P.2d 165].) A change is “reasonable” if the “alterations of employees’ pension rights . . . bear some material relation to the theory of a pension system and its successful operation, and . . . [any] disadvantage to employees [is] accompanied by comparable new advantages.” (Ibid.)
Further, in Abbott v. City of Los Angeles (1958) 50 Cal.2d 438, 449 [326 P.2d 484], the court made it clear that modifications to pension plans which result in general, overall benefits do not necessarily meet the constitutional standard of “reasonableness.” “[I]t is advantage or disadvantage to the particular employes [jzc] whose own contractual pension rights, already earned, are involved which are the criteria by which modifications to pension plans must be measured . . . .” (Ibid., italics added.)
Using these principles, the courts have consistently invalidated increases in employee contribution rates which have not been accompanied by commensurate benefits. For example, in Allen, supra, 45 Cal.2d 128, this court struck down an increase in employee contribution rates adopted by the City of Long Beach. The court found that the new rate “obviously constitute^] a substantial increase in the cost of pension protection to the employee without any corresponding increase in the amount of the benefit payments he [would] be entitled to receive upon his retirement.” (Id., at p. 131.)
Similarly, in Wisley v. City of San Diego (1961) 188 Cal.App.2d 482 [10 Cal.Rptr. 765], the court held that gradual increases in the contribution rates of employees over a period of years were unconstitutional. Wisley affirmed the trial court’s conclusion that “the maximum amount that could legally be deducted from the employees’ gross pay was that percentage which was in effect at the time each of the individual plaintiffs was originally employed.” (Id., at p. 485.) Significantly, the court did not invalidate the city’s application of the increased contribution rates to employees who had entered the system after the new rates had been adopted. Nor did the court find constitutionally infirm the variation in rates paid by the employees. It was the increase in the rates by the city for employees already in the system that was held unconstitutional. (See also Abbott v. City of Los Angeles, supra, 50 Cal.2d at pp. 447-455.)
These rules, if followed by this court, would mandate a finding that the increase in the rates of employee contributions to the City’s retirement sys*308tem violated the contract clauses of the federal and state Constitutions. The solvency or financial viability of the pension system was not a factor in the decision to raise the rates. The City stipulated that the decision of the administering board to raise the rates bore “no relationship to any unfunded liability of the system.” Further, Robert Logan, city retirement officer and retirement board secretary, testified that the plan was financially sound. Sixty-three percent of the benefits already accumulated could have been paid if the plan were to be discontinued. In fact, many of the previous modifications in the employee contribution rates since 1955 had been decreases resulting from increased earnings of the fund.
The increased rate of contribution was a detriment to the employees in the system. Yet, Logan testified that the rate increase was not offset by a corresponding increase in benefits. Indeed, the City never contended otherwise. Since there was no benefit, Allen (supra, 45 Cal.2d 128) and Wisley (supra, 188 Cal.App.2d 482) would teach us that the increase in the contribution rates unconstitutionally impaired the vested pension rights of these employees.
Nevertheless, the majority argue that the modifications here were made pursuant to existing provisions of the retirement system which allowed for rate revisions based upon actuarial investigations and evaluations of the system’s assets and liabilities.1 (Maj. opn. at pp. 302-303.)
However, whether the contribution rates were increased by an amendment to the controlling provisions of the system or by a decision of the administering board under those provisions is irrelevant. An employee’s right to a city’s pension benefits vests upon his or her acceptance of employment. The state and federal Constitutions apply to subsequent modifications of those vested rights regardless of how such modifications are accomplished.
Moreover, the majority’s distinction would permit a city to circumvent the principles established by Kern (supra, 29 Cal.2d 848) and its progeny by simply enacting flexible ordinances allowing modifications in the rates of contribution and the calculation of retirement benefits. For example, a city that enacts a pension system permitting its administrative board to re*309vise the formula for calculating retirement benefits would be free to substitute a fixed pension for a flexible one. Even if such a modification were disadvantageous to the city’s employees, it would be constitutionally permissible. Under the majority’s approach, the modification would have been made “pursuant to the charter and ordinances which delineate [the] retirement system and prescribe the employees’ vested rights.” (Maj. opn. at p. 303.)
Yet, this reasoning and result violate the principles of Allen and Abbott. In each of those cases, this court struck down as unconstitutional modifications in pension systems which changed a city’s retirement benefits from fluctuating to fixed amounts. (Allen v. City of Long Beach, supra, 45 Cal.2d at pp. 131-133; Abbott v. City of Los Angeles, supra, 50 Cal.2d at pp. 447-455. See also Abbott v. City of San Diego, supra, 165 Cal.App.2d at pp. 518-520.) The revisions were invalidated because “no offsetting advantages were included”2 and the cities had made “no showing that the . . . amendments [bore] any material relation to the integrity or successful operation or to the preservation or protection of the pension program applicable to these plaintiffs.”3 The constitutional protections which public employees have been guaranteed would have little value if this court were to allow them to be so easily circumvented. Indeed, there would, in effect, be no limits to the modifications to pension benefits which cities could enact.
Under section 24.0903, the City may revise the rates of new members entering the system when necessary to provide the members with the benefits guaranteed by section 24.0301. However, this section does not empower the City to increase the contribution rates of those employees already in the system unless such an increase “bear[s] some material relation to the theory of [the] pension system and its successful operation” and is “accompanied by comparable new advantages.” (Allen v. City of Long Beach, supra, 45 Cal.2d at p. 131.)
The City’s contention that the new safety members should not bear the burden of paying higher contribution rates than those members already in the system when both groups will receive equal benefits upon retirement was expressly rejected by this court in Allen. There, the defendant city contended that the increased employee contribution rates were necessary to ameliorate “personal problems” which would be created by differences in pension costs and benefits among employees who performed the same job. The Allen court’s words were clear and precise. “Such purposes, however *310beneficial to the city, bear no relation to the functioning and integrity of the pension system established for persons employed prior to [the enactment of the amendments], and constitute no justification for materially reducing the vested contractual rights earned by plaintiffs prior to the time [the amendment] was adopted.” (Id., at p. 133, italics added.)
Since the City’s increase in the contribution rates of its safety members fails to meet the “reasonableness” test required by the state and federal Constitutions for modifying vested pension rights, the trial court’s judgment should be affirmed.
Mosk, J., concurred.

Article 4, section 24.0903 of the San Diego Municipal Code provides: “On the basis of any and all of such investigations, evaluations and determination [as described in section 24.0901], the Board shall adopt such mortality, service, and other tables as it deems necessary and make such revisions in rates of contribution of members as it deems necessary to provide the benefits for which the rates for normal contributions are required to be calculated. The decision of the Board of Administration on matters covered by this section, if arrived at in good faith, shall be conclusive.”

Abbott v. City of San Diego, supra, 165 Cal.App.2d at page 518.

Abbott v. City of Los Angeles, supra, 50 Cal.2d at page 455.