The California Supreme Court heard arguments on October 3, 2011 in Retired Employees Association of Orange County v. County of Orange — an appeal characterized by one observer as “one of the most important cases in years for public agencies.” RBG’s Ernest Galvan argued on behalf of the retirees.
This closely-watched case is about whether a local government can take away retirement health benefits from former public employees who have already retired. The people being harmed here are over 5,000 Orange County retirees and survivors. Their average pension is $30,000 per year. Their access to health care depends on being part of the overall pool of Orange County employees and retirees when rates are set. When they worked for the County, they paid extra for their own familys health insurance in order to make sure that retiree rates stayed under control. The Countys benefits staff and the employees considered these pooled retiree health plan rates to be one of the benefits of working for Orange County.
In 2005, Orange County tried to change the rules that had been established for decades. They saw the chance to take raise millions of dollars by shifting higher health insurance premiums to existing retirees, thus freeing up money that they could offer in pay raises to the current employees. The result is that current retirees have seen their premiums skyrocket. In a few years, those premiums will consume their entire pensions. Retirees in this case are not asking the county to pay their health insurance. They pay their own premiums. They are only asking that the County keep its promise that the retirees would pay premiums based on the entire County pool–not artificially inflated “retiree-only” premiums.
Commenting to a reporter after the argument, Galvan stated, “Our concern is that if the Supreme Court gives Orange County what it wants, it’s going to be open season on retirees.”
Governor Schwarzeneggers Commission on Public Employee Pension Reform in 2007 singled out Orange County as unique in crossing the line between changing future benefits and taking benefits away from people who have already earned them: Unlike many of the other agents profiled in this report, Orange County has addressed [retirement health benefits] by choosing to drastically change the structure of its retiree health plan to lower costs rather than to fund previous obligations.”
The Retired Employees Association of Orange County is challenging the County’s action in a federal lawsuit that was filed in Santa Ana in November 2007. In July of last year the 9th Circuit held that the central state-law question in that case – whether retired employees have a contract right to receive this benefit – was unsettled, and asked the state Supreme Court to provide clarification. The Supreme Court will issue its decision before the end of the year.