IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF SACRAMENTO

Transcription

1 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Deborah B. Caplan [SBN 0] Lance H. Olson [SBN 0] Richard C. Miadich [SBN ] OLSON HAGEL & FISHBURN LLP Capitol Mall, Suite Sacramento, CA Telephone: () - Facsimile: () -0 Richard@olsonhagel.com Attorneys for Amicus Curiae National Conference of Public Employee Retirement Systems IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA CHARLES R. CHUCK REED; WILLIAM KAMPE; TOM TAIT; PATRICK MORRIS; and STEPHANIE GOMES, in their capacities as individual voters and proponents of the subject statewide ballot measure, v. Petitioners, DEBRA BOWEN, in her capacity as Secretary of State of California, and KAMALA HARRIS, in her capacity as Attorney General of California, and DOES through, Respondents. COUNTY OF SACRAMENTO CASE NO.: NATIONAL CONFERENCE ON PUBLIC EMPLOYEE RETIREMENT SYSTEMS ( NCPERS ) AMICUS CURIAE BRIEF IN SUPPORT OF RESPONDENTS DATE: March, 0 TIME: :0 a.m. ASSIGNED FOR ALL PURPOSES TO: JUDGE: Hon. Allen H. Sumner DEPT.: PETITION FILED: February, 0

2 INTRODUCTION Petitioners in this case, who are the proponents of a proposed state constitutional amendment initiative measure entitled the Pension Reform Act of 0 (hereafter the Initiative ), request that the Court take the extraordinary step of red-penciling the circulating title and summary that Respondent California Attorney General prepared for the Initiative. Pursuant to Rule.00(c)() of the California OLSON HAGEL & FISHBURN LLP CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Rules of Court, the National Conference on Public Employee Retirement Systems ( NCPERS ) submits this amicus curiae brief in support of the Attorney General s title and summary and in opposition to the Petitioners requested relief. Founded in, NCPERS is the largest trade association for public sector pension funds, representing more than 0 funds in the United States and Canada. It is a unique non-profit network of trustees, administrators, public officials, and investment professionals who collectively manage nearly $ trillion in pension trust assets for active and retired public employees across the nation. NCPERS members include virtually all of California s state and county public employee retirement systems and several major city retirement systems, including the California Public Employee Retirement System, the California State Teachers Retirement System, the Los Angeles County Employees Retirement Association, and the Los Angeles City Employees Retirement System. Combined, NCPERS California members administer retirement benefits for approximately. million current and retired public employees in California. As discussed herein, NCPERS believes the circulating title and summary accurately and fairly informs voters that the Initiative would eliminate existing state constitutional protections that the California Supreme Court has long held apply to state and local public employees. Under the Court s prior decisions, current public employees possess a vested right to accrue retirement benefits for future work based on the benefits promised at the time they commenced employment a right the Court has held is protected from impairment by the Contract Clause of the California Constitution. This is commonly referred to as the California Rule. The Initiative proposes two amendments to the California Constitution that would Debra Bowen, in her capacity as Secretary of State of California, is also named as Respondent in this action, but takes no position on the merits of Petitioners claims.

3 unquestionably eliminate the constitutional protections that the California Rule affords current public employees. First, it would add new section to Article VII mandating that, henceforth, public employee retirement benefits shall be earned and vested incrementally, only as the recipient actually performs work, and only in proportion to work performed. (Initiative at p. [ ].) Second, the OLSON HAGEL & FISHBURN LLP CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Initiative would amend existing section of Article I the State Contract Clause to explicitly provide that new Section of Article VII is not deemed to impair the obligation of contracts. (Ibid.) The Purpose and Intent section of the Initiative states that the intent of these constitutional amendments is to supersede the California Supreme Court s prior decisions which have been construed as limiting the ability to prospectively modify pension and retiree healthcare benefits for work not yet performed by government employees. (Initiative at p. [ ].) After filing the Initiative and requesting that the Attorney General prepare a circulating title and summary, the Petitioners publicly touted that the Initiative is their effort to eliminate the existing legal roadblocks that prevent state and local governments from reducing (or wiping out altogether) the retirement benefits that current public employees may earn for future work performed. Given the unmistakable purpose and effect of the Initiative as even Petitioners previously described it, there should have been no surprise when the circulating title and summary issued by the Attorney General contained the following sentence: Eliminates constitutional protections for vested pension and retiree health care benefits for current public employees, including teachers, nurses, and peace officers, for future work performed. Approximately a month after the title and summary issued, however, Petitioners commenced this lawsuit objecting to use of the words/phrases eliminates constitutional protections, vested, and teachers, nurses, and peace officers. The arguments that Petitioners invoke in support of these objections are disingenuous, to say the least. Rather than candidly acknowledging that the California A copy of the full text of the Initiative is attached as Exhibit A to the Verified Petition for Writ of Mandate, filed February, 0. The Initiative also proposes constitutional amendments that would require state and local government agencies to create a report if the funding level of the retirement and healthcare plan they provide falls below a specified level. (Initiative at p. -.) However, the most significant and notable constitutional amendments being proposed are those that would make incremental vesting of pension and retiree health care benefits constitutionally permissible, and thereby allow government agencies to modify or even eliminate such benefits for future years of service. (See MPA at :-.) (Exh. A to O Brien Decl. in support of Respondents Opposition, discussed infra at p..)

4 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Rule is the settled law of this State they disavow it as mere language in prior cases. They deny that current public employees really possess a vested right to the future accrual of retirement benefits or that this vested right is constitutionally protected from impairment by the State Contracts Clause, even though that is precisely what California Rule holds. And, perhaps most crassly of all, Petitioners now contend that the word eliminates is false, misleading, and/or prejudicial even though they used that same word themselves and even though Attorney General s use of that word in the title and summary of a similar initiative was deemed appropriate by a prior court. NCPERS submits this amicus curiae brief primarily to assist the Court in understanding the origins and extent of the California Rule, and in evaluating how the Initiative would affect the vested rights and constitutional protections enjoyed by California public employees under this existing state law. As much as Petitioners would like to muddy the waters, the reality of what the Initiative seeks to do is crystal clear. If adopted, current public employees in this State would no longer possess the vested, constitutionally protected right that existing state law provides to the future accrual of retirement benefits. Accordingly, NCPERS urges the Court to find that the Attorney General s title and summary accurately and fairly describes the dramatic changes that the Initiative proposes to existing state law applicable to public employee retirement benefits and to deny Petitioners requested relief. ARGUMENT I. THE ATTORNEY GENERAL S TITLE AND SUMMARY IS ENTITLED TO DEFERENCE AND MAY ONLY BE CHANGED BASED ON CLEAR AND CONVINCING EVIDENCE THAT THE TITLE AND SUMMARY IS FALSE, MISLEADING, OR OTHERWISE CONTRARY TO LAW The California Elections Code requires the Attorney General to prepare a title and summary that must appear on each page of a statewide initiative petition that is circulated among the voters for purposes of obtaining the requisite number of signatures to qualify for placement on the ballot. (Elec. Code, 00.) The purpose of the Attorney General s title and summary is to inform voters of the chief purpose and points of the proposed measure. (Elec. Code, 00.) Limited to just 0 words, the Attorney General s determination as to how to best summarize a measure in the circulating title and summary is entitled to great deference. A court may take the extraordinary step of modifying the

5 Attorney General s title and summary only where it is established by clear and convincing evidence the highest standard of proof available in civil cases that the title and summary is false, misleading, or otherwise inconsistent with the requirements of law. (See Elec. Code, 0; Lungren v. Super. Ct. () Cal.App.th, -.) As discussed next, Petitioners objections to the circulating title and summary issued for the Initiative fail to meet this high standard. OLSON HAGEL & FISHBURN LLP CAPITOL MALL, SUITE, SACRAMENTO, CA 0 II. THE ATTORNEY GENERAL S TITLE AND SUMMARY ACCURATELY AND FAIRLY DESCRIBES HOW THE INITIATIVE PROPOSES TO CHANGE EXISTING STATE LAW APPLICABLE TO PUBLIC EMPLOYEE RETIREMENT BENEFITS Petitioners preface their challenge to the Attorney General s title and summary by explaining that the Initiative does not propose to allow employers to change or alter retirement benefits that have already vested based on prior years of service. (MPA at :-.) Rather, the Initiative proposes to amend the state constitution to allow state and local government employers... to modify future pension benefits based on future work which these employees have not yet performed. (Id. at :0-.) This distinction, they tell the Court, is central to the Initiative and makes untrue the suggestion that the Initiative would eliminate vested, constitutional rights. (Id. at :.) This distinction is irrelevant, however, and only highlights how Petitioners challenge is no more than an effort to mislead this Court and ultimately, the voters, about the Initiative s purpose and effect with respect to existing state law. As explained in this section, state law does not limit vested retirement benefits to those earned based on work already performed. Long-settled and binding decisions of the California Supreme Court hold that the contract clause of the California Constitution also protects current public employees vested right to earn future retirement benefits based on the benefits promised when they began employment for future work performed. Moreover, it is indisputable that public employees who will be most affected by the Initiative s elimination of these vested rights are teachers, nurses, and peace officers. Given these facts, there is simply no clear and convincing evidence showing that the challenged portions of the Attorney General s title and summary are false, misleading, or otherwise prejudicial.

6 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 A. Contrary to What Petitioners Suggest, It is Settled Law in California that the Current Public Employees Possess a Constitutionally Protected, Vested Right to Earn Retirement Benefits for Future Work Based on the Benefits Promised When They Began Employment For nearly a century, the California Supreme Court has consistently held that state and local public employees possess a constitutionally protected vested right to promised retirement benefits. The California Supreme Court first discussed the nature of vested retirement benefit rights in O Dea v. Cook () Cal.. There, it held that the offer of pension in exchange for work not yet performed is not a gratuity or a gift, but rather a part of the contemplated compensation for those services and... a part of the contract of employment itself. (O Dea, supra, Cal. at -; see also Dryden v. Board of Pension Comm rs. () Cal.d,.) The Court explained that state constitutional law compelled this holding because the California Constitution expressly prohibits making gifts of public funds. (See O Dea, supra, Cal. at [citing then Cal. Const., art. IV,, which is now part of Cal. Const., art. XVI, ].) The Court later reaffirmed this concept in In re Marriage of Brown () Cal.d, stating that [a]lthough some jurisdictions classify retirement pensions as gratuities, it has long been settled that under California law such benefits do not derive from the beneficence of the employer, but are properly part of the consideration earned by the employee. (Id. at.) In Kern v. City of Long Beach () Cal.d one of the two decisions the Initiative explicitly seeks to supersede the California Supreme Court expounded upon the nature and extent of California public employees pension rights. There, a public employee of the City of Long Beach began work at a time when the city charter provided that after 0 years of service, a city employee would receive a pension equal to 0 percent of his/her pay. Just days before petitioner s retirement, however, the city s voters repealed the city charter s pension provisions in their entirety. After the City denied his application for pension benefits on the basis of this charter amendment, petitioner sought issuance of a writ of mandate compelling the city to grant his application. The question before the Kern Court was whether petitioner acquired a vested right to a pension which the city could not abrogate by repealing the charter provisions without impairing its obligation of contract. (Kern, supra, Cal.d at

7 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 0, italics added.) The Kern Court answered this question in favor of the petitioner and granted his requested relief. Under its prior holdings, the Court explained, public employee pensions () are an element of the promised compensation for public employment, () are an integral part of the employment contract, and () that the employee s right to a pension vests upon acceptance of employment. (Kern, supra, Cal.d at - [citing O Dea, supra and Dryden, supra], italics added.) This vested right to a pension constitutes a binding obligation to which constitutional protections apply, including the protections against impairment of contract. Although there may be no right to tenure [public employment], public employment gives rise to certain obligations which are protected by the contract clause of the Constitution, including the right to the payment of salary which has been earned. Since a pension right is an integral portion of contemplated compensation [citation omitted], it cannot be destroyed, once it has vested, without impairing a contractual obligation. (Id. at, italics added.) Application of constitutional protections to public employees vested right to retirement benefits does not, the Court noted, depend on whether the public employee is still on active status (i.e., still working and not yet receiving benefits) or retired. Insofar as the time of vesting is concerned, there is little reason to make a distinction between the periods before and after the pension payments are due. It is true that an employee does not earn the right to full pension until he has completed the prescribed period of service, but he has actually earned some pension rights as soon as he has performed substantial services for his employer. (Id. at, italics added.) This is so because pension benefits are a form of deferred compensation. That is, public employees are not fully compensated when upon receipt of their regular salary because, in addition, [they] have then earned certain pension benefits, the payment of which is to be made a future date. (Kern, supra, Cal.d at.) Granted, a public employee does not earn the right to payment of pension benefits until he or she has satisfied the requisite conditions for such payment (e.g., years in service, etc). However, the mere fact that performance is in whole or in part dependent on certain contingencies does not prevent a contract from arising a contract that is subject to constitutional Cases re pension benefits as deferred compensation.

8 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 protections. (Ibid.) Thus, an employing governmental body may not deny or impair an employee s right to pension benefits without violating the contract clause of the state constitution any more than it could refuse to make salary payments that are immediately due. (Ibid.) In Miller v. State of California () Cal.d 0 the second case the Initiative explicitly seeks to supersede the California Supreme Court reaffirmed that under Kern, () public employees in California possess a contractual right to promised pension benefits that vests immediately upon acceptance of employment, () that right is protected from impairment by the Contract Clause of the California Constitution. (Id. at.) While Kern had also recognized that government entities could make reasonable modifications and changes to the pension system to reflect changing conditions and maintain the integrity of the system, Miller explained that subsequent decisions had made clear that changes which result in disadvantage to employees must be accompanied by comparable new advantages. (Id. at, citing Allen v. City of Long Beach () Cal.d and Abbot v. City of Los Angeles () 0 Cal.d.) Read together, the Court summarized, these prior decisions make clear, that upon acceptance of public employment, [a public employee] acquir[es] a vested right to a pension based on the system them in effect. (Id. at, italics added.) While Kern and Miller made clear that public employees possessed a constitutionally protected vested right in pension benefit for work already performed, there remained an open question as to whether current public employees possessed a constitutionally protected vested right to continued accrual of pension benefits for future work. In Legislature v. Eu () Cal.d, the California Supreme Court resolved this question by definitively holding that current public employee have a vested and constitutionally protected right to accrue pension benefits based on the system in effect at the start of employment for future work performed. Eu concerned a wide-ranging legal challenge to a statewide initiative measure, designated as Proposition 0 and adopted by the state s voters on November, 0. Among other things, Proposed modifications must be evaluated by reference to the advantage or disadvantage to the particular employees whose own contractual pension rights, already earned, are involved. (Allen, supra, Cal.d at.) Further, to be sustained as reasonable, modifications of employees' pension rights must bear some material relation to the theory of a pension system and its successful operation. (Ibid.)

9 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Proposition 0 proposed to add a new section to Article IV of the California Constitution concerning pension benefits for state legislators. (Eu, supra, Cal.d at 0.) This new section provided that the State would contribute only the employer s share to the federal Social Security System on behalf of participating legislators elected to or serving in the Legislature on or after November, 0, but no other pension or retirement benefit shall accrue as a result of service in the Legislature. (Ibid.) The new section further stated that it shall not be construed to abrogate or diminish any vested pension or retirement benefit which may have accrued under existing law []. (Id. at 0-.) Petitioners in Eu contended that this change to legislators pension benefits constituted an unconstitutional impairment of contract. (Eu, supra, Cal.d at.) As to incumbent legislators who continued to serve after November, 0, petitioners argued that Proposition 0 unconstitutionally impaired their vested rights to continued participation in the pension program... [and] to continue to earn pension benefits so long as they remain qualified to receive such benefits through continued state service. (Id. at.) Petitioners grounded their argument in the principle espoused by the Court in Miller that, upon acceptance of public employment, a public employee acquires a vested right to a pension based on the system then in effect. (Id. at, [quoting Miller, supra, Cal.d at ], italics added.) This principle, petitioners argued, encompasses two distinct vested rights: a primary right to receive any vested pension benefits upon retirement, as well as the collateral right to earn future pension benefits through continued service, on terms substantially equivalent to those then offered. (Id. at -.) The California Supreme Court in Eu agreed. Incumbent legislators possessed a vested right to earn additional pension benefits through continued service. (Eu, supra, Cal.d at 0, italics added.) Through the retirement system made available to legislators, the state had elected to treat legislators in a manner similar to other state employees, providing them with a plan whereby pension benefits could be acquired through continued service beyond their initial term of office. (Id. at.) Having done so, the state could not constitutionally abandon that plan with providing some comparative new advantage. Thus, the Court held that, under California law, all incumbent legislators acquired a vested right to earn additional pension benefits through continued service, a right which Proposition 0

10 clearly impairs. (Id. at, italics added.) The California Supreme Court s holding in Eu that current public officials and employees possess a constitutionally protected vested right to pension benefits based on future work, is commonly referred to as the California Rule. (See Exh. F to Hertz Decl. at p. [Monahan OLSON HAGEL & FISHBURN LLP CAPITOL MALL, SUITE, SACRAMENTO, CA 0 article].) Subsequent decisions have made clear that the constitutional protections the California Rule guarantees to pension benefits also applies to promised retiree health care benefits. (See, e.g., Thorning v. Hollister School District () Cal.App.th, 0- [the principle that an employee begins earning pension rights from the day he starts employment is not limited simply to pension cases but extends to other types of benefits, including retiree health care benefits], Ops. Cal. Atty. Gen. (000) [same].) It is therefore settled law in California today, that current public employees possess a constitutionally protected, vested right to the future accrual of retirement benefits (i.e., pension, retiree health care, etc) based on the benefits promised at the start of employment. Petitioners repeatedly seek to obfuscate the fact that the California Rule is the law of the land today. For example, they refer to the California Supreme Court s articulation of the California Rule in Eu as language in certain appellate court decisions suggesting that the state statutes governing public pensions create a contract between government agencies and their employees, language, they tell us, that has made government employers reluctant to propose change to how current employees will accrue pension benefits for future work. (MPA at :0-, italics added.) Citing University of Even before Eu, some courts of appeal had already begun interpreting Miller to recognize that current employees could possess a constitutionally protected vested right to retirement benefits for future work. For example, in United Firefighters of Los Angeles City v. City of Los Angeles () Cal.App.d, the Court of Appeal for the Second Appellate District invalidated a city charter amendment that proposed to create a three percent cap on the cost of living adjustments to the pensions of current city firefighters and policemen. Prior to the amendment, the charter provided no limit on the cost of living increases these employees pensions. In defense of the charter amendment, the city argued that city employees vested rights to retirement benefits are set by the law in effect at the time service is actually rendered i.e., that such rights vest on an ongoing basis, and are not fixed at the outset of employment. The Court of Appeal rejected this argument as contrary to the California Supreme Court s holding in Miller that a public employee acquires a vested right to pension benefits based on the system in effect when he accepted public employment. (Id. at 0, citing Miller, supra, Cal.d at,.) Since current city police and firefighters had entered employment under a system in which cost of living increases to their pensions were not capped, the charter amendment unconstitutionally impaired their vested rights to earn pension benefits for future work performed that were substantially the same as the benefits promised when they commenced employment. (Id. at 0-.) Currently, XXXXX other states recognize that, as a matter of state law, their respective public employees possess a constitutionally protected vested right to XXXXXXXXXXX.

11 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Minnesota law professor Amy Monahan s article that criticizes the California Rule, Petitioners represent that the effect of this line of cases is not clear, but that the language in these cases has been used to argue that state local government employees are guaranteed to earn pension benefits based on the formula in place for their job classification... on the date they are hired. (Id. at :- :.) These statements grossly misrepresent the status of the California Rule. The California Rule is not merely language in appellate cases that has been used to argue an otherwise unsettled legal proposition. The California Supreme Court s articulation of the California Rule in Eu is binding, settled law in this state. Local governments are not simply reluctant to modify how retirement benefits will accrue for future work, the California Rule legally prohibits them from doing so. Nor does the law review article by Professor Monahan, as Petitioners represent, lend any support for the view that the effects of the California Rule are unclear with respect to the application of constitutional protections for vested rights to accrue future benefits. To the contrary, Professor Monahan candidly (and correctly) cites the California Supreme Court s decision in Eu for the proposition that: [c]urrent California law holds that pension statutes not only create a contract between the state and its employees, but also that the contract is formed on the first day of employment and is of open duration, thereby protecting both past and future pension accruals. (Exh. F to Hertz Decl. at.) What Petitioners really mean to say, of course, is that they (like Professor Monahan) disagree with the California Rule. Indeed, as discussed infra, the whole point of the Initiative that Petitioners are proposing is to eliminate the California Rule. While Petitioners may freely disagree with existing legal rules and propose their elimination, this does not alter the reality that, today, the California Rule is the settled and binding law of this State. As discussed next, the Attorney General s title and summary accurately and fairly describes the chief points and purposes of the Initiative relative to existing state law. B. The Phrase Eliminates Constitutional Protections is Neither False Nor Misleading Petitioners challenge to the phrase eliminates constitutional protections in the title and summary is both disingenuous and contrary to express purpose of the Initiative to supersede the California Rule by constitutional amendment.

12 CAPITOL MALL, SUITE, SACRAMENTO, CA 0. Petitioners Themselves Have Publicly Touted the Fact that the Initiative Would Eliminate Existing Law Applicable to Future Accruals Preliminarily, two of the Petitioners in this litigation have publicly touted the fact that the Initiative would eliminate the state constitutional roadblocks that currently prevent government employers from modifying how employees accrue retirement benefits for future work. On January, 0, Petitioners Charles R. Chuck Reed and William Kampe, the mayors of the cities of San Jose and Pacific Grove, respectively, published an article online entitled Pension Reform Will Remove Roadblocks to Reform. (Exh. A to O Brien Decl. in Support of Respondents Opposition.) The article asserts that government leaders have had their hands tied by the California Rule on vested rights. (Id.) As alleged examples of this, Petitioners Reed and Kampe describe how superior court decisions in their respective jurisdictions have invalidated efforts to change employees pension rights for future work performed on the basis that they violate existing constitutional protections applicable to vested rights. (Ibid. See also Exhs. and to Miadich Decl.) Petitioners then state in bolded text, no less that they have authored a ballot initiative [t]o eliminate these roadblocks that currently prohibit disadvantageous changes to employees future retirement benefit accruals. (Exh. A to O Brien Decl.) Petitioners Reed and Kampe s use of the word eliminate to describe the Initiative constitutes is admission by a party opponents that may be considered by this Court for the truth of the matter asserted. (See Evid. Code, 0; see also [CASE CITE].). Use of the Word Eliminate Is Not Advocacy, as Petitioners Now Contend, But Rather an Accurate Description of What the Initiative Proposes to Do More fundamentally, the Attorney General s (and Petitioners ) use of the term eliminate is appropriate because it precisely describes the purpose and intended effect of the Initiative. The Purpose and Intent language states that the Initiative is intended to supersede those portions of the California Supreme Court s decisions in Kern, Miller, and their progeny which have been construed as limiting the ability to prospectively modify pension and retiree health care benefits for work not yet performed by government employees. (Initiative, (d).) The word supersede is a legal term of art that means to void or annul. (See Black s Law Dictionary, XXXX.) But the Attorney General s title and summary must be written using plain language, not technical legal terms. (See, e.g., Martinez v. Super. Ct. (00) Cal.App.th, [Check this case cite].) In lay terms, by superseding the

13 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 California Supreme Court s holdings that recognize the existence of the California Rule, the Initiative eliminates the constitutional protections that rule guarantees to public employees vested rights to earn future retirement benefit accruals. (Compare Black s Law Dictionary, XX [definition of supersede ] with Meriam-Webster Dictionary and Thesaurus entries for eliminate.) The constitutional changes that the Initiative proposes also demonstrate why the use of the word eliminate is accurate. Recall that, under the Kern, Miller, and their progeny, the California Supreme Court has interpreted Article I, section to protect from impairment current employees vested right to accrue retirement benefits for future work. (See, e.g., Eu, supra, Cal.d at [the state contract clause[] protect[s] the vested pension rights of public officers and employees].) The Initiative would eliminate these existing constitutional protections by explicitly amending Article I, to provide that modifications of employees retirement benefits for future worked shall not be deemed to impair the obligations of contracts. (Initiative at p. [ ].) Having previously used the word eliminates to tout this very aspect of the Initiative to their constituency, Petitioners now apparently fear that the voters at large will not embrace such a dramatic elimination of constitutional protections. That fear does not, however, justify this Court s intervention to replace a perfectly accurate word eliminates with something that polls better for Petitioners. Indeed, what Petitioners appear to really be arguing is that the word eliminate is always impermissible advocacy unless a measure proposes taking a provision out of the Constitution. (MPA at :-.) But this argument finds no support in statute or decisional law. Rather, prior decisions have approved the Attorney General s use of the term eliminate in the title and summary issued for other statewide initiative measures that, like the Initiative, would supersede a decision of the California Supreme Court which had previously interpreted the state constitution to protect the rights of certain citizens. Proposition on the November 00 statewide general election ballot proposed to amend the state constitution to provide that [o]nly the marriage between a man and woman is valid or recognized in California. (See Exh. to Respondents RJN at p..) Prior to issuance of the ballot title and summary for Proposition, the California Supreme Court held that same-sex couples possessed a right, under the state constitution, to enter into marriage. The Attorney General included the phrase

14 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Eliminates Right of Same-Sex Couples to Marry in the ballot title and summary. The proponents of Proposition filed a lawsuit challenging this phrase on the grounds that it was misleading and argumentative. (Id. at -.) The Sacramento Superior Court rejected the proponents arguments and upheld the title and summary. The court found that there was nothing inherently argumentative or prejudicial about the word eliminate. (Exh. to Respondents RJN at -.) Nor was the Attorney General s use of the word misleading under the circumstances. (Id. at -.) The California Supreme Court has unequivocally held that same-sex couples have a constitutional right to marry under the State Constitution. It is undisputed that if Proposition is approved, marriage would be limited to individuals of opposite sex, and individuals of same sex would no longer have the right to marry in California. The Attorney General s statement that the initiative would eliminate the right of same-sex couples to marry in California is therefore not false or misleading. While this prior ruling of the superior court does is not binding precedent, this Court can and should consider it for its persuasive value. (See Brown v. Franchise Tax Bd. () Cal.App.d 00, 0 fn..) As the superior court implicitly recognized, the state constitutional protections that Californians enjoy are not limited to those explicitly stated in the California Constitution, but also include those which the California Supreme Court has interpreted the State Constitution to provide. Both types of constitutional protections, of course, are susceptible to elimination through subsequent constitutional amendments. (See, e.g., Strauss v. Horton (00) Cal.th [upholding Proposition as permissible constitutional amendment, the effect of which was to eliminate the constitutional right of same-sex couples to marry which the Court had interpreted the California Constitution to provide in its earlier decision of In re Marriage Cases (00) Cal.th ].) The Initiative is no different from Proposition in this regard. Today, the decisions of the California Supreme Court hold that current public employees possess a vested right to earn retirement benefits for future work which is protected by the Contracts Clause of the State Constitution. If the Initiative is adopted, these protections would cease to exist. Just as the Attorney General s use of eliminate in the title and summary for Proposition was upheld, this Court should hold that the term eliminate is neither false nor misleading with respect to the Initiative.

15 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 McDonough v. Superior Court (0) 0 Cal.App.th, upon which Petitioners heavily rely, is readily distinguishable from the instant case. The main issue in McDonough was whether it was argumentative or prejudicial for the ballot title of a San Jose City initiative to use the phrase Pension Reform. The court of appeal held that the word reform was inappropriate because the word in both definition and connotation suggested that the existing pension system was subjectively defective or wrong and in need of improvement. (Id. at - & fn..) The word eliminates does not create the same impression of subjective judgment. That is, unlike the reform, eliminate does not imply whether its object is subjectively positive or negative; it merely indicates that the object will cease to exist. Thus, the rationale on which McDonough struck the word reform does not apply to eliminate here. It bears noting that Petitioner Reed was one of the driving forces behind the proposed city initiative at issue in McDonough, much as he is with the Initiative here. Petitioners, therefore, are obviously familiar with the court of appeal s holding that the word reform is argumentative and therefore inappropriate for inclusion in the ballot title for a proposed initiative. Despite this, on or about October, 0, Petitioners submitted to the Attorney General a proposed title and summary for the Initiative which used the phrase Public Employee Retirement Benefits System Reform. (Exh. C Pet., italics added.) While not directly relevant to the merits of the claims presented here, the fact that Petitioners advocated the usage of a word which they knew the court of appeal had recently deemed argumentative certainly bears on the credibility.. Petitioners Separate Challenges to Constitutionally Protected and Vested Likewise Lack Merit Petitioners separately challenge the phrase constitutionally protected and the word vested as being false and/or misleading in their own right. These contentions also lack merit. First, there can be no serious dispute following the California Supreme Court s decision in Eu that public employees () possess a vested right in the accrual of future retirement benefits that () is constitutionally protected against impairment vis-à-vis the State Contracts Clause. To suggest otherwise, as Petitioners do, simply ignores the explicit holding in Eu. (See, e.g., Eu, supra, Cal. d at [ both the federal and state contract clauses protected vested rights of public officers and

16 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 employees from unreasonable impairment ] and [ under California law, all incumbent legislators acquired a vested right to earn additional pension benefits through continued service, a right which Proposition 0 clearly impairs ], italics added.) Second, Petitioners contention that the California Rule does not stem from the state Constitution, but rather from common law is misleading at best. (See MPA at :-0.) As a threshold matter, the vested rights that current employees possess in their retirement benefits are only rooted in contract law because, as a matter of state constitutional law, they cannot be treated as gifts or gratuities. (O Dea, supra, Cal. at, discussed supra at p..) Thus, it is not wholly accurate to suggest that the California Rule does not stem from state constitutional law. Third, even if one assumes the point that the vested right to which the California Rule applies i.e., the right to earn accrue retirement benefits for future work is purely a creature of contract law, that still does not make the phrase constitutionally protected false or misleading. This is because Petitioners argument conflates constitutional protections with constitutional rights. (See, e.g., P&As at : [ we are not dealing with a constitutional right ], italics added.) Rights arise from various sources, including statutes, contracts, the common law, or constitutional law. Some of these rights are constitutionally protected while others are not. A classic example concerns welfare benefits. Recipients of welfare benefits acquire a property right to such benefits as a matter of statutory law, but that right is subject to constitutional protections. (See, e.g., Goldberg v. Kelly (0) U.S., -.) That is, while it would not be accurate to say that a receipt of welfare benefits has a constitutional right to those benefits, it would be accurate to say that the recipient has a statutorily conferred property right in welfare benefits that is constitutionally protected. (Ibid.) The California Rule is no different. Employees vested right to accrue retirement benefits for future work is conceptually distinct from the constitutional protections that apply to that right. The Attorney General s title and summary does not say that the Initiative would eliminate a constitutional right to accrue future benefits; in fact, the word right does not even appear in the title and summary. What the title and summary says is that the Initiative would eliminate the constitutional protections applicable to vested pension and retiree healthcare benefits... for future work performed. (Exh. B to Pet., italics added.) Thus, assuming arguendo Petitioners position that employees vested rights to

17 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 accrue retirement benefits for future work stems from common law contract principles, that observation bears nothing at all on the question of whether the phrase constitutional protections is false or misleading. Whatever the source of those vested rights, the California Supreme Court has made clear they are constitutionally protected from impairment by the State Contracts Clause. (See, e.g., Eu, supra, Cal.d at -.) Lastly, in addition to ignoring the fact that the California Supreme Court s decisions have consistently used the term vested to modify public employees right to accrue retirement benefits for future work, Petitioners affirmatively misrepresent how that term was used in the Court s decision in Retired Employees Assn. of Orange County v. County of Orange (0) Cal.th [ REAOC ]. Citing alleged footnote, Petitioners represent that the Court in that case stated that employee benefits do not vest until they are actually earned. (MPA at :-.) But the REAOC decision contains neither a footnote nor any such holding concerning the meaning of the term vest. Rather, in footnote, the REAOC court states just the opposite: [a] benefit is deemed vested when the employee acquires an irrevocable interest in the benefit. The vesting of retirement benefits must be distinguished from the maturing of those benefits, which occurs after the conditions precedent to the payment of benefits have taken place or the benefits are otherwise in control of the employee. [citations omitted] These sentences in footnote are consistent with the Court s several earlier decisions holding that public employees acquire a vested right i.e., an irrevocable interest in promised retirement benefits from the date they commence public employment. (See, e.g., Kern, supra, Cal.d at -; Miller, supra, Cal.d at -; Eu, supra, Cal.d at XX.) Moreover, the irrevocable interest that vests under existing law extends to retirement benefits earned for work already performed, as well as the continued accrual of retirement benefits based on future work. (Eu, supra, XXXX.) Nothing in footnote suggests that the Court has retreated from these prior statements using the term vested to describe the nature of irrevocable interest to retirement benefits that public employees acquire from the moment they begin work. Perhaps Petitioners are confused by the last sentence of footnote which, does not describe the Court s usage of the term vest but instead merely describes that one of the parties to the case contends that a retirees right to the benefits [at

18 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Instead, Petitioners again appear to be conflating two distinct concepts when they assert that although the formula for retirement benefits may be set at the start of employment, the individual benefit does not actually vest until the employee actually works at the government agency for 0 or 0 years. (MPA at :-.) While it is true that the right to payment of retirement benefits does not vest or mature until the completion of service, the Court s decisions in Kern, Miller, and their progeny recognize a separate vested right to earn retirement benefits based on the system in place at the time they commence employment. Under the California Rule, the latter vested right includes the right to earn retirement benefits for future work. Since, as Petitioners themselves state, the purpose of the Initiative is to take the California Rule head-on, the Attorney General s use of the term vested in the title and summary is neither false nor misleading. In sum, the phrase eliminates constitutional protections for vested pension and retiree healthcare benefits for current public employees... for future work performed in the Attorney General s title and summary is accurate and fair, not false or misleading. That phrase precisely describes the Initiative s purpose and effect on existing state law. The Court should therefore entirely reject Petitioners objections to that phrase. C. The Phrase Teachers, Nurses and Peace Officers Accurately Informs Voters Which Public Employees Will Be Most Impacted by the Constitutional Changes the Initiative Proposes Similarly, the Court should reject Petitioners objection to the phrase teachers, nurses, and peace officers. Contrary to what Petitioners contend, there is an obvious logical basis why the Attorney General has used that phrase. Teachers, nurses, and peace officers are indisputably among the largest group of public employees who will be affected by the constitutional changes the Initiative proposes. According to recent United State Census Bureau data, there are approximately. million state and local public employees in California. (See Exh. to Respondents RJN.) This group includes, instructional employees i.e., teachers in elementary, secondary, and higher education, who together account for roughly 0 percent of all state and local public employees. There are, issue] vested at the time of retirement, and explicitly disavows any claim that the benefits vested when the employee began his or her service. (REAOC, supra, Cal.th at, fn..)

19 CAPITOL MALL, SUITE, SACRAMENTO, CA 0 health and hospital public employees, most of whom are nurses, constituting about eight percent of all state and local public employees. (Ibid.) Finally, peace officers is an umbrella category that, contrary to what Petitioners suggest, includes city police officers, officers in the county sheriffs offices, Highway Patrol officers, specific officers and employees in the Department of Corrections, specified employees in the offices of the Attorney General and State Controller, the Inspector General and his/her designated employees, etc. (See, e.g., Penal Code 0., 0., & 0..) There are approximately 0, such peace officers, who together constitute about nine percent of all state and local employees in California. (Exh. to Respondents RJN.) Combined, the three sub-groups of teachers, nurses, and peace officers comprise about half of all state and local public employees in California. Given this, it is entirely reasonable and appropriate for the Attorney General to specifically mention these groups so that voters are given a full picture of which public employees will be most impacted by the Initiative. The Court should therefore reject Petitioners challenge to the phrase teachers, nurses, and peace officers. CONCLUSION Under existing California law, current public employees possess a vested right to accrue retirement benefits for future work performed based on the benefits promised to them at the time of employment. The California Supreme Court has consistently interpreted the Contract Clause of the California Constitution to protect this vested right to future accrual of retirement benefits from impairment. This is known as the California Rule and is the settled, binding law of our state today. Petitioners are free to disagree with California Rule and, as they have done with the Initiative, propose constitutional amendments that would eliminate the California Rule. What Petitioners are not free to do is to propose such a significant change to our state constitution, then shield the voters from knowing the truth about what it is that Petitioners seek to accomplish. The Attorney General s title and summary accurately and fairly informs the voters precisely what the Initiative will do. Petitioners objections to the title and summary are not supported by clear and convincing evidence far from it. Instead, they are merely an effort to hide the truth about the Initiative from voters. The Court should therefore deny the Petition in its entirety.

20 Dated: March, 0 OLSON HAGEL & FISHBURN LLP CAPITOL MALL, SUITE, SACRAMENTO, CA 0 Respectfully submitted, OLSON HAGEL & FISHBURN LLP Deborah B. Caplan Lance H. Olson Richard C. Miadich By: RICHARD C. MIADICH Attorneys for amicus curiae