July 2, 2010

Pension Obligation Bonds and OC's "retro" pension chow-down

By Pension Obligation Bonds and OC's "retro" pension chow-down

Author: Harold Johnson (hej@pacificlegal.org)

Orange County voters had a constitutional right to say “yes” or “no” before being saddled with heavy costs for new (retroactively applied) pension benefits for selected gov’t workers.

That’s the gist of arguments that PLF has filed with a state appellate court, in support of a legal challenge to the OC “retro” pension giveaway — a windfall that threw $100 million on taxpayers’ backs the second it took effect.

An editorial in today’s Orange County Register underscores the lawsuit’s broader importance.  Will the courts defend or dilute the state Constitution’s guarantee that voters must have the final say on major, longterm government “indebtedness or liability“?   The need for recognizing and enforcing this rule was never greater than at this time of crisis, when California’s public sector is submerged in red ink precisely because pols have ignored voters’ rightful role in the charting of fiscal policy.

The mandate that voters OK major, longterm debts or liabilities  — Article XVI, Section 18 — was a response to a meltdown disturbingly similar to today’s — the depression of the 1870s.   As the economy seized up, California cities and counties were crushed by the bills on their reckless borrowing and spending for “narrow [special] interests,” as the California Supreme Court has recounted.     

Worth noting:PLF and the folks we’re representing in the OC litigation (the Fullerton Association of Concerned Taxpayers) aren’t novices in defending taxpayers’ right to vote on projects, programs or promises that would compel  taxpayers to shell out over the long-term.

We are the ones who defeated a half-billion-dollar bond scheme that was designed to pay for state pensions, because voters hadn’t been consulted.   This landmark 2007 decision by the California Third District Court of Appeal, is titled, Pension Obligation Bond Committee v. All Persons Interested.

In the OC case, we argue that the trial court ruling, which denied taxpayers’ right to vote on the “retro” pension giveaway, invented two new exceptions to the Constitution’s right-to-vote guarantee.  Both of these newly minted exceptions, we contend, collide with tenets of our Pension Obligation Bond victory.   

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