Judge’s Ruling Offers More Questions Than Answers

Saturday, June 24, 2006 | The judge handling City Attorney Mike Aguirre’s landmark pension case issued a tentative ruling Friday filled with questions surrounding the fairness and viability of repealing a decade’s worth of city employees’ pension benefits.

In his tentative ruling, Superior Court Judge Jeffrey Barton laid down the issues he wants argued by attorneys on both sides of the case when they convene in his courtroom at 9 a.m. Monday morning. Following that hearing, the judge will rule on whether pension agreements struck in the 1990s and early 2000s were corrupt and illegal and if, as Aguirre claims, they should be repealed altogether.

The judge didn’t issue a tentative ruling on the legality of the pension deals or on the benefits themselves, but rather opened a window into what issues he will be considering during and after Monday’s hearing.

The judge primarily focused on the mechanics of actually setting aside a batch of vested pension benefits that were granted to employees in labor contracts, but also challenged both parties on their arguments defending and challenging the legality of controversial pension deals struck in 1996 and 2002.

Among the questions Barton grapples with are:

• Can the judge issue a binding opinion on the legality of the benefits if not all impacted parties, such as non-union employees, politicians and retirees, are represented in the case?
• Doesn’t this dispute always simply return to the city trying to undo an admittedly costly labor contract that it enacted 10 years ago?
• Because the benefits are only one portion of labor contracts that also include wage and other salary and benefit details, how can the court set aside the benefits without jeopardizing the entire contract?

On a more basic level, the judge raises numerous questions over whether the deals themselves are illegal – a judgment that would need to come before any decision is even made on how or if to do away with the benefits themselves. He at times questions how closely tied the alleged quid pro quo was in the deals

In a press conference Friday evening after the ruling was released, Aguirre was optimistic. He said his attorneys had anticipated the questions raised by Barton and were preparing responses.

“There is light, there is hope, there is a chance – and a very good chance – that we will be able to persuade the judge given the questions he’s asked because we believe there are good and proper answers to all of them.”

Aguirre said that even if the city did lose the summary judgment – an attempt to expedite a ruling by forgoing a lengthy jury trial – on Monday, a jury trial on the case would likely follow.

On Friday, the judge also tentatively ruled that Aguirre does have the authority to argue the case on behalf of the city, striking down an attempt by the San Diego City Employees’ Retirement System to have the case thrown out.

Attorneys for the pension system, which is arguing opposite Aguirre, and employee unions couldn’t be reached for comment or declined to comment Friday evening.

In court documents, Aguirre argues that pension deals struck in 1996 and 2002 are illegal and void because certain pension officials violated conflict-of-interest laws in benefiting financially from deals they approved.

In those years, city administrators offered employee unions beefed up employee pension benefits. At the same time, administrators asked the pension board – populated largely by top city management and union representatives – to allow it to artificially minimize its annual payment into the pension system. The district attorney and U.S. attorney have both brought criminal corruption charges in connection with the 2002 deal.

Aguirre also argues that the pension deals, as well as a host of other benefits given to employees and elected officials, violated local and state rules that forbid municipalities from going into debt without a vote of the people.

The combination of increased benefits and decreased payments has severely strained the pension system, causing at least a $1.4 billion deficit. The city’s annual payment into the system has jumped up considerably in recent years and threatens to dominate city budgets for years to come. Aguirre hopes to halve the deficit through this lawsuit and another similar one, hinting that such legal challenges are the only realistic way to stave off bankruptcy for the city.

Barton wants the parties to discuss the basics of the deals in addition to the intricacies of actually repealing the benefits. He also questions how the city itself can seek certain relief from the pension system when it was the City Council that approved the deals and allegedly violated the anti-debt laws.

The judge states that there is merit in the pension system’s argument that it was the City Council not SDCERS that violated the debt-limit provisions. He also states that employees gave up other benefits in accepting the pension boosts as part of the negotiating process. “This raises several concerns,” he wrote.

Aguirre said he believes he can cut off many of the judges concerns with a simple argument: that under state conflict-of-interest statutes, any contract is void if created when a conflict is present.

Mayor Jerry Sanders sounded a diplomatic tone late Friday.

“I’ve wanted to see a resolution of this through the courts, and I think what the judge ruled today gives the city attorney and [the San Diego City Employees’ Retirement System] and the rest of them an opportunity to argue in the court Monday,” he said in a voice mail. “I just see this as another step in the process.”

The lawsuit has been one of the key cogs in San Diego’s pension drama and has created major fissures throughout City Hall. It will also likely serve as a benchmark nationally as other states and municipalities begin to deal with their ballooning pension liabilities.

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