SAN
FRANCISCO ÑThe California Supreme Court sounded sympathetic to Orange County on
Monday in its attempt to roll back health benefits for retirees Ñ a case being
closely followed by local governments waiting to see how far they can go in
cutting benefits for their employees.
The
justices seemed sensitive to the financial troubles local governments face as
they try to walk back promises made in better times.
The
Retired Employees Association of Orange County sued the county in 2007 after
the Board of Supervisors Ñ faced with budget problems Ñ passed a resolution
that made health care premiums more expensive for the retirees.
Rosen,
Bien & Galvan partner Ernest Galvan, who represents the retirees, argued
that the county broke its implicit promise to maintain benefit levels for vested
retirees.
What
law, Justice Kathryn Mickle Werdegar asked Galvan, supports the position that a
county can bind itself in perpetuity to the promise of health care benefits
"no matter what a budget may look like in the future?"
"The
'perpetuity' is not as scary as it sounds," Galvan answered, explaining
that the county could decide to reduce future benefits for current employees,
but can't do so retroactively.
Orange
County's lawyer, Meyers Nave Riback Silver & Wilson partner Arthur
Hartinger, argued there was never a vested right to low premiums, and that the
changes had to be made because the unfunded liability the county faced
threatened to sink the plan altogether.
Justice
Ming Chin seized on that idea, using it to press Galvan on the notion that the changes
were unfair to the retirees.
"What
about the argument about the plan being on the verge of bankruptcy and the
solution being to eliminate the plan?" Chin asked.
Galvan
replied that there was no evidence in the record that the plan was facing
bankruptcy.
Both
sides said local governments around the state are watching the case closely.
Other
counties such as Los Angeles, Galvan said after oral argument, are waiting for
the court's decision to see if they, too, can cut retirees' health benefits.
"Our
concern is that if the Supreme Court gives Orange County what it wants, it's
going to be open season on retirees," he said.
Renne
Sloan Holtzman Sakai partner Jonathan Holtzman, who represented amici curiae the League of
California Cities and the California State Association of Counties, said after
the oral argument that most public agencies are facing "catastrophic
liabilities" for such benefits.
"You
have to decide at some point: Do you want libraries or do you want this?"
Holtzman said. "That's not theoretical anymore.
"I
would say this is one of the most important cases in years for public
agencies."
The
case is Retired
Employees v. County of Orange, S184059.