Santa Barbara County Taxpayers Assn. v. County of Santa Barbara

• Decision Date: 03 September 1987
• Citation: 239 Cal.Rptr. 769,194 Cal.App.3d 674
• Court: California Court of Appeals Court of Appeals
• Parties: SANTA BARBARA COUNTY TAXPAYERS ASSOCIATION; George H. Johnson; and William F. Luton, Plaintiffs and Appellants, v. COUNTY OF SANTA BARBARA; Board of Supervisors for the County of Santa Barbara; and Kristi Johnson, in her official capacity as Auditor-Controller for the County of Santa Barbara, Defendants and Respondents. Civ. B023919.

Page 769

239 Cal.Rptr. 769

194 Cal.App.3d 674

SANTA BARBARA COUNTY TAXPAYERS ASSOCIATION; George H. Johnson; and William F. Luton, Plaintiffs and Appellants, v. COUNTY OF SANTA BARBARA; Board of Supervisors for the County of Santa Barbara; and Kristi Johnson, in her official capacity as Auditor-Controller for the County of Santa Barbara, Defendants and Respondents.

Civ. B023919.

Court of Appeal, Second District, Division 6, California.

Sept. 3, 1987.

As Modified on Denial of Rehearing Oct. 1, 1987.

Review Denied Nov. 18, 1987.

Ronald A. Zumbrun, Anthony T. Caso, Jonathan M. Coupal, Sacramento, for plaintiffs and appellants.

Kenneth L. Nelson, Co. Counsel, Don H. Vickers, Deputy Co. Counsel, Santa Barbara, for defendants and respondents.

Schwartz, Steinsapir, Dohrmann & Sommers and Michael R. Feinberg, Terri A. Tucker, Los Angeles, as amici curiae on behalf of defendants and respondents.

GILBERT, Associate Justice.

Article XIII B of the California Constitution, also known as Proposition 4, limits the amount of tax revenues a government entity may spend. Section 5 states, in pertinent part: "Each entity of government may establish ... retirement ... funds.... Contributions to any such fund, ... shall ... constitute appropriations subject to limitation...." ¹

Here we conclude that the statute means what it says, and that a county may not exclude from its annual appropriations contributions to its employees' retirement fund.

FACTS

Beginning in 1985, the County of Santa Barbara had recalculated its 1978-1979 base year appropriations limit forward to reflect the exclusion of the county's contributions TPA asserts that the plain language of section 5 requires the inclusion of such contributions as appropriations subject to the appropriations limit. We agree and reverse the judgment.

                to the retirement fund. 2  The Santa Barbara County Taxpayers Association (TPA), et. al., filed suit for injunctive and declaratory relief and mandate, challenging the County Board of Supervisors' (county) exclusion of those contributions from its appropriations to the 1986-1987 fiscal year budget. 3  The trial court held that section 5 applies [194 Cal.App.3d 678] only to retirement systems created after January 1, 1979, and that contributions to the retirement system constitute excludable debt service pursuant to Carman v. Alvord (1982) 31 Cal.3d 318, 182 Cal.Rptr. 506, 644 P.2d 192.   The court entered judgment against TPA after sustaining the county's demurrer without leave to amend
                

DISCUSSION

The county primarily relies on the holding in Carman, supra, that a special voter-approved tax levied to provide contributions to the Public Employees Retirement System (PERS) does not violate the 1 percent limitation on property taxes of article XIII A since those contributions service debt under that article. The county urges that since the definition of debt service in article XIII A is nearly identical to that in article XIII B, ⁴ and the purposes of the two articles are nearly the same, contributions to the county retirement system are not appropriations subject to limitation under section 5 of article XIII B. We do not find this reasoning persuasive.

The Supreme Court limited its holding in Carman to its facts and to article XIII A. (Carman v. Alvord, supra, 31 Cal.3d at p. 333, see also p. 326, 182 Cal.Rptr. 506, 644 P.2d 192.) Unlike article XIII A, article XIII B plainly and specifically states that contributions to a governmental retirement fund, derived from the proceeds of taxes, "shall for purposes of this Article constitute appropriations subject to limitation...." (Art. XIII B, § 5, emphasis added.) No such directive appears in article XIII A.

It is true that contributions to a governmental pension plan may fall under the general definition of debt service under both articles XIII A and XIII B (see art. XIII B, § 8(g); Carman v. Alvord, supra, 31 Cal.3d at pp. 325, 327-328, esp. fn. 8, 182 Cal.Rptr. 506, 644 P.2d 192), and " '[a]ppropriations subject to limitation' ... shall not include: [p] (a) Debt service ..." (see art. XIII B, § 9(a)). But this does not override the specific language of section 5 which states unconditionally that retirement contributions derived from proceeds of taxes constitute appropriations subject to limitation under article XIII B. Such specific constitutional provisions prevail over the general exclusion for debt service of section 9. (Rose v. State of California (1942) 19 Cal.2d 713, 723-724, 123 P.2d 505.)

We must interpret the provisions of article XIII B as a whole to effectuate its purposes of limiting the growth of appropriations and the expenditure of taxes. (Marrujo v. Hunt (1977) 71 Cal.App.3d 972, 977, 138 Cal.Rptr. 220; County of Placer v. Corin (1980) 113 Cal.App.3d 443, 446, 170 Cal.Rptr. 232; County of Los Angeles v. State of California (1987) 43 Cal.3d 46, 61, 233 Cal.Rptr. 38, 729 P.2d 202.) The more reasonable interpretation of article XIII B that comports with these purposes is that the county's contributions to the employees' retirement system must be counted as appropriations subject to the limitation provisions of article XIII B. This interpretation prevails even though these contributions might also be considered debt service.

Vested Contractual Rights to Retirement Funds

The county, of course, has a duty to pay pension funds as promised and earned. (Carman v. Alvord, supra, 31 Cal.3d at p. 325, 182 Cal.Rptr. 506, 644 P.2d 192.) "By entering public service an employee obtains a vested contractual right to earn a pension on terms substantially equivalent to those then offered by the employer. [Citations.] On the employee's retirement, after he has fulfilled pension conditions, an immediate obligation arises to pay benefits earned. Earned benefits are deferred compensation (Olson [v. Cory (1980) ] 27 Cal.3d at p. 540 [178 Cal.Rptr. 568, 636 P.2d 532] ) and, when payable, become a fixed indebtedness of the employer. [Fn. omitted.]" (Ibid.) "Pensions are a governmental obligation of great importance." (Id., at p. 325, fn. 4, 182 Cal.Rptr. 506, 644 P.2d 192.)

We are sympathetic to the county's desire to maintain the integrity of its pension plan and are mindful that to impair pension rights would violate the federal contracts clause. (U.S. Const., art. I, § 10, cl. 1; Carman v. Alvord, supra, 31 Cal.3d at pp. 328, 332-333, 182 Cal.Rptr. 506, 644 P.2d 192.) The vested rights of secured creditors must be protected, as well. To prevent the impairment of these rights may require the county to redistribute expenditure allocations to meet these pension obligations.

Amicus, the California Teachers Association (CTA), argues that if we find that retirement funds are subject to the appropriations limit, government employees such as teachers will be left without income following retirement. We hope this ominous prognostication proves wrong. Nevertheless, we are constrained to follow the law rather than rule according to its wisdom or folly. To the extent that CTA's calamitous predictions may be accurate, the electorate may vote for additional funding pursuant to article XIII B, section 4, or the Legislature may find a way to ameliorate the effects of this problem.

Limitation of Article XIII B to New or Changed Funds Only

The county contends that article XIII B should apply, if at all, only to newly created or changed funds. It claims that the language of section 5 mandates this conclusion. The first sentence of section 5 reads, "[e]ach entity of government may establish such contingency, emergency, unemployment, reserve, retirement, sinking fund, trust, or similar funds as it shall deem reasonable and proper." The county argues that the limitations to appropriations were intended to apply prospectively only--to newly created or changed funds--to be consistent with the article's policy of excluding prior indebtedness from the appropriations limit (see §§ 8(g), 9(a)). CTA argues that the words "may establish" and "shall deem reasonable and proper" indicate prospective application. It also argues that this language mandates that contributions to any listed fund which was in existence prior to the effective date of the initiative are exempt as appropriations subject to limitation. We disagree.

Proper statutory construction does not proceed in a vacuum. (2A Sutherland, Statutory Construction (3d ed. 1943) §§ 46.05, p. 90; 46.07, p. 110.) One of the oldest and most fundamental canons of statutory construction is that once the purpose of the legislation has been ascertained, it must prevail over a strict, literal reading, unless the statute cannot be viewed any other way. (Friends of Mammoth v. Board of Supervisors (1972) 8 Cal.3d 247, 259, 104 Cal.Rptr. 761, 502 P.2d 1049; Gibbs v. City of Napa (1976) 59 Cal.App.3d 148, 154-155, 130 Cal.Rptr. 382; Rushing v. Powell (1976) 61 Cal.App.3d 597, 603-604, 130 Cal.Rptr. 110.) One ferrets out the legislative purpose of a statute by considering its objective, the evils which it is designed to prevent, the character and context of the legislation in which the particular words appear, the public policy enunciated or vindicated, the social history which attends it, and the effect of the particular language on the entire statutory scheme. (58 Cal.Jur.3d, Statutes, § 23, pp. 341-342; 2A Sutherland, supra, at § 57.03, p. 644; In re Marriage of Bouquet (1976) 16 Cal.3d 583, 587, 128 Cal.Rptr. 427, 546 P.2d 1371.)

The County and CTA urge this court to adopt a literal, lexicographic interpretation of section 5 by dissecting the meaning of these particular words in the abstract. The first sentence of section 5 when viewed in the context of article XIII B as a whole merely restates existing law and specifically identifies those funds to which contributions are subject to limitation. (Friends of Mammoth v. Board of Supervisors, supra, 8 Cal.3d at p. 260, 104 Cal.Rptr. 761, 502 P.2d 1049.)

CTA also urges us to follow the general rule that...