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Grand Jury finds flaws in vote approving pension increases

Published: Saturday, June 30, 2012 at 4:07 p.m.
Last Modified: Saturday, June 30, 2012 at 4:07 p.m.

The Sonoma County Grand Jury has picked up on the contention of a local pension system critic that the Board of Supervisors did not follow legal requirements when it approved enhanced retirement benefits for county employees a decade ago.

Ken Churchill, a Santa Rosa winemaker and former solar energy firm owner, claims those actions were willful on the part of county leaders at the time and could be grounds for rolling back the higher pension formulas now received by more than 1,000 county retirees — and promised to thousands more current workers.

The grand jury said his claim of procedural mistakes may have some merit, raising the question of whether the more generous pensions were legally approved.

The jury’s two-page report, which summarizes its months-long investigation, is titled “Sonoma County Pension Increases in 2002 — Legal or Not?”

The report triggers a formal process that requires a response from the Board of Supervisors. Supervisor Shirlee Zane, the board chairwoman, said a county inquiry and response, due back July 31, was already under way.

But the grand jury’s central question — and Churchill’s by proxy — may have no ultimate consequence, according to one leading public sector retirement law expert.

Under the two key sections of state law governing how local legislative bodies change benefits for public employees, any procedural missteps by the county would not invalidate its decisions, said Harvey Leiderman, a San Francisco attorney who advises the state’s largest public retirement funds.

“There’s no punishment in those sections. There may be an argument elsewhere under the law,” said Leiderman. He doubted however that any legal trigger would be sufficient to roll back public employee benefits, which enjoy strong legal protection in the state.

Still, the grand jury report advances a case Churchill has made in public forums and newspaper columns since last year, hammering county officials over the benefit changes.

The deals granted a higher percentage of compensation for every year worked and lowered the retirement age, to 50 for public safety workers and 60 for all other workers. Along with pension fund stock market losses, the deals have been a significant factor underlying skyrocketing county pension costs, up 401 percent in the past 12 years, to $87.2 million a year.

Echoing fellow critics, Churchill has hit on the apparent self-interest involved in the deals, which were retroactive for workers at the time and extended to management and the Board of Supervisors. A cost-sharing deal with employees designed to pay for the increases has turned out to be woefully inadequate, critics note.

Churchill, 58, has taken aim specifically at the procedural points leading up to the votes. He claims the Board of Supervisors did not retain its own financial expert to evaluate the impact of the benefit increases. The board also failed to provide sufficient notice or properly agendize those votes, Churchill says.

“It was wrong. They knew exactly what they were doing. They robbed the bank on their way out,” he said in an interview Thursday.

The grand jury did not complete its investigation due to time constraints and difficulty tracking down people and documents to verify Churchill’s claims. The investigation did include a review of county documents, actuarial reports, newspaper articles and interviews with county and retirement officials.

According to the report, the jury found:

-- No evidence the Board of Supervisors had hired its own actuary — separate from one hired by the county retirement board — or that the actuary had been present at the board votes in 2002.

-- No evidence the board had given notice of the votes two weeks prior, as required.

-- No evidence that the changes were placed on the regular agenda. Instead, the grand jury said it understood the approvals were made as part of the consent agenda, reserved for routine, non-controversial county business.

The report urged citizens, media and future grand jury members to carry on the investigation.

Zane, the board chairwoman, said county attorneys were conducting an internal inquiry with a plan to respond to the grand jury in writing.

Initial results from the inquiry suggest the county is on safe legal ground, Zane said. County Counsel Bruce Goldstein would not elaborate on her comments.

“We’re absolutely looking into it,” Zane said.

Churchill said the report validated his quest. He called for a larger public inquiry into the pension decisions, including hearings before the Board of Supervisors with leaders involved at the time.

Aside from Supervisor Valerie Brown, who participated in one of the votes, no current board member was serving at that time. Most administrators and fiscal leaders have also moved on or retired.

Churchill did not rule out a legal challenge, including a push to roll back the enhanced benefits.

“It doesn’t seem to me you can let this stand,” he said.

Labor leaders, meanwhile, bristled at the new target on county pensions.

“Our members have been paying into the system for 10 years at higher rates under the expectation of making all of their retirement plans on that (pension),” said Lathe Gill, Santa Rosa-based area director for Local 1021 of Service Employees International Union, the county’s largest labor group. “Undoing that at this point would be unfair.”

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