Valdes v. Cory

• Decision Date: 09 February 1983
• Court: California Court of Appeals Court of Appeals
• Parties: , 9 Ed. Law Rep. 312, 4 Employee Benefits Cas. 1124 Charles P. VALDES et al., Petitioners, v. Kenneth CORY, as State Controller et al., Respondents. Mary Ann GRAVES, as Director, etc. Real Party in Interest. CALIFORNIA SCHOOL EMPLOYEES' ASSOCIATION et al., Petitioners, v. Kenneth CORY, as State Controller et al., Respondents. Mary Ann GRAVES, as Director, etc., Real Party in Interest. Civ. 21654.

Page 212

189 Cal.Rptr. 212

139 Cal.App.3d 773, 9 Ed. Law Rep. 312,

4 Employee Benefits Cas. 1124

Charles P. VALDES et al., Petitioners, v. Kenneth CORY, as State Controller et al., Respondents.

Mary Ann GRAVES, as Director, etc. Real Party in Interest.

CALIFORNIA SCHOOL EMPLOYEES' ASSOCIATION et al., Petitioners, v. Kenneth CORY, as State Controller et al., Respondents.

Mary Ann GRAVES, as Director, etc., Real Party in Interest.

Civ. 21654.

Court of Appeal, Third District, California.

Feb. 9, 1983.

Rehearing Denied March 7, 1983.

Hearing Denied March 13, 1983.

Bernard L. Allamano, Gary P. Reynolds, Bradley G. Booth, Sacramento, Christine A. Bologna, San Diego, Peter A. Janiak, Maureen C. Whelan, Madalyn Frazzini, E. Luis Saenz, Siona D. Windsor, San Jose, for petitioners.

Davis, Cowell & Bowe and Alan C. Davis, San Francisco, for amicus curiae on behalf of petitioners.

Morrison & Foerster and James J. Brosnahan, Berkeley, F. Bruce Dodge, Pamela R. Federman, Los Angeles, Bruce Teicher, Oakland, Gerald Ross Adams, Chief Counsel and Charles I. Gibbs, Sacramento, Roland K. Bowns, Elk Grove, John Breen, Thomas A. Aceituno, Cynthia G. Besemer, Staff Counsel, Sacramento; Dennis A. Barlow, County Counsel and Timothy P. Hayes, Chief Deputy County Counsel, Marysville; Breon, Galgani, Godino & O'Donnell and Robert A. Galgani, San Francisco, Walters, Bukey & Shelburne and John L. Bukey, Sacramento, Thomas Nussbaum, General Counsel, West Sacramento, and Catherine Close, Staff Counsel, Gerald A. Sherwin, County Counsel, and Mark Ornellas, Deputy County Counsel, Stockton, Thomas M. Griffin, Chief Counsel, and Roger D. Wolfertz, Asst. Chief Counsel, Sacramento, for respondents.

Russell Iungerich and Judith M. Mitchell, Los Angeles, for real party in interest.

Richard C. Anthony, Frank J. Fekete, Peter C. Carton, Bakersfield, Ronald D. Wenkart and Joanne A. Velman, Bakersfield, for movant.

PUGLIA, Presiding Justice.

In consolidated original mandamus proceedings, various members of the Public Employees' Retirement System (PERS) and their employee organizations challenge, on constitutional and other legal grounds, the validity of certain provisions of chapter 115 of the Statutes of 1982. They seek peremptory writs of mandate to compel respondents, State Controller Kenneth Cory, the PERS Board of Administration, and the respective school employers of the school-employee petitioners, to perform their legal duties without regard to the challenged provisions of chapter 115. All respondents support the crux of the petitioners' attack on the challenged provisions of chapter 115 as does amicus curiae Federated Fire Fighters of California. Intervening as real party in interest, Mary Ann Graves, the then Director of Finance (Director), has answered and submitted arguments in opposition to petitioners. (Graves has since been succeeded as Director of Finance.)

Petitioners Valdes, Collins, and Coan are either active or retired state employees who are members of PERS; they are joined in these proceedings by their employee organization, California State Employees' Association (CSEA), a state employee's organization operating as a nonprofit corporation under the laws of California. Petitioners Mutoza, Rao, Wilde, Anderson, Kobb, Rivera, Sinogui, and Brooks are either active or retired, classified (nonteaching) employees of various public school or community college districts and are all current members of PERS; joining them as a petitioner is their employee organization, California School Employees' Association, a nonprofit California corporation having as its primary purpose the representation of classified school employees throughout California.

Petitioners CSEA and California School Employee's Association are properly before this court in their representative capacity. (Glendale City Employees' Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 341, 124 Cal.Rptr. 513, 540 P.2d 609; Professional Fire Fighters, Inc. v. City of Los Angeles (1963) 60 Cal.2d 276, 283-284, 32 Cal.Rptr. 830, 384 P.2d 158.)

Chapter 115 of the Statutes of 1982 was introduced as Assembly Bill 1253 and entitled "Fiscal Affairs;" the act became effective on March 13, 1982, as urgency legislation (ch. 115, § 67) designed to balance the fiscal year 1981-1982 budget and to avoid a year-end deficit. The provisions of chapter 115 under scrutiny here are sections 58, 59, 60, and 61 and section 14, subdivision (b). These sections directly affect the method of PERS funding under the Public Employees' Retirement Law (Gov.Code, § 20000 et seq.; all citations to sections of an unspecified code are to the Government Code). ¹

Section 58 prohibits the payment of state-employer contributions from the state general fund to the Public Employees' Retirement Fund for the months of April, May and June 1982. These state-employer contributions were previously appropriated for PERS funding in the 1981-1982 budget (see also § 20751); section 58 purports to effect their reversion to the unappropriated surplus of the General Fund.

Similarly, section 59 of chapter 115 ceases school-employer contributions to PERS for the months of April, May, and June 1982; sections 60 and 61 provide a mechanism for the reversion of state monies, otherwise specially allocated as monthly school-employer contributions to PERS (see Stats.1981, ch. 99, items 610-101-001; 687-101-001), to the unappropriated surplus of the General Fund.

Section 58 further requires the PERS Board to transfer an amount equal to that which would otherwise be paid by state and school employers as their three-month contributions to PERS, from the "reserve against deficiencies" portion of the Public Employees' Retirement Fund to its unallocated portion. Section 14, subdivision (b), of chapter 115 mandates a .41 percent reduction retroactive to July 1, 1981, of previously appropriated employer contributions by school districts, county school superintendents, and community college districts for the entire 1981-1982 fiscal year. This subdivision similarly directs the PERS Board to make commensurate adjustments or refunds from its reserve against deficiencies.

According to the Conference Committee Report on Assembly Bill 1253, the elimination of three months of state and school-employer contributions to the PERS would result in a total savings to the state general fund of $180 million ($105 million in state contributions for state employees and $75 million in state contributions for school employees), with an additional $7 million savings by operation of section 14, subdivision (b). There would be a corresponding diminution in the PERS reserve against deficiencies account, currently estimated by the chief actuary of the PERS to contain approximately $950 million. No provision is made for future replacement of this amount in the reserve account.

On March 17, 1982, the PERS Board adopted a resolution declining to transfer the approximately $180 million equal to employer contributions for three months from the reserve against deficiencies account to the unallocated portion of the PERS fund until a final judgment by an appellate court orders the Board to do so. ² Shortly thereafter, respondent Cory announced he would comply with the provisions of chapter 115 which prohibit him from paying employer contributions to PERS, explaining that as State Controller, he is "... bound to follow the laws enacted by the Legislature unless and until the courts determine otherwise." Under section 20754, the Controller would otherwise be obliged to transfer state monthly contributions from the general fund and other obligated funds in the state Treasury to the PERS fund.

The present petitions invoking the original jurisdiction of this court ensued. We issued alternative writs of mandamus but declined to issue a stay pending our review.

Petitioners have properly invoked our original mandate jurisdiction under article VI, section 10, of the California Constitution and California Rules of Court, rule 56. The constitutional questions presented here are of great public importance deserving prompt resolution (Amador Valley Joint Union High Sch. Dist. v. State Bd. of Equalization (1978) 22 Cal.3d 208, 219, 149 Cal.Rptr. 239, 583 P.2d 1281; California Housing Finance Agency v. Elliott (1976) 17 Cal.3d 575, 579-580, 131 Cal.Rptr. 361, 551 P.2d 1193.) Moreover, the named respondents are under a constitutional duty to comply with the contested provisions of chapter 115 unless and until an appellate court declares them unconstitutional. (Cal. Const., art. III, § 3.5.)

We shall uphold petitioners' contention that the challenged provisions of chapter 115 violate the constitutional prohibition against impairment of contract. Accordingly, we shall order a peremptory writ to issue directing respondents to perform their duties without regard to the unconstitutional provisions of chapter 115.

Petitioners also contend that the challenged sections of chapter 115 violate the statutory provisions codified in section 20000 et seq. and general principles of trust law. We address only the claim of unconstitutional impairment of contract for it is elementary that the Legislature has power, absent constitutional restrictions, expressly to amend or repeal both the common law and existing statutes. (See Civ.Code, § 22.2; see also generally 58 Cal.Jur.3d, Statutes, §§ 4, 5.) ³

An understanding of the Public Employees' Retirement Law and its legislative history is critical in reaching a disposition of the constitutional issues involved. In 1929, a legislatively created commission on pensions (Stats.1927, ch. 431) recommended the establishment of a retirement system for state employees. (Report of the Commission on Pensions of State Employees, 1929.) This report stressed the need to place a retirement system on a "sound financial basis, where liabilities are provided for as they are incurred, rather than when they mature," and periodically to investigate the...