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Westly v. California Public Employees' Retirement System Board of Administration1/30/2003
As modified February 25, 2003; no change in judgment. Petition for rehearing denied.
CERTIFIED FOR PUBLICATION
At issue is the meaning of the provision of article XVI, section 17, of the California Constitution (Art. XVI, § 17), that grants the Board of Administration (the Board) of the California Public Employees' Retirement System (CalPERS) "plenary authority . . . for . . . administration of the system . . . ."
Art. XVI, § 17 provides in pertinent part:
"Notwithstanding any other provisions of law or this Constitution to the contrary, the retirement board of a public pension or retirement system shall have plenary authority and fiduciary responsibility for investment of moneys and administration of the system, subject to all of the following: . . . ."
The state Controller, challenges the Board's assertion of plenary authority to exempt its employees from civil service, to bypass the Controller's duty to issue warrants for the pay of employees, and to issue stipends, salaries, and other payments in excess of the amounts permitted by the Government Code.
The trial court granted the Controller's motion for judgment on the pleadings on all but the sixth cause of action, which challenges the Board's authority to exempt its portfolio managers from the civil service provisions of the California Constitution.
We will affirm the judgment with the exception that, unlike the trial court, we find the Controller has standing to raise the sixth cause of action because the Controller has the right to issue warrants and audit payments to ensure an expenditure is authorized by law.
The primary purposes of Art. XVI, § 17, are to grant retirement boards the sole and exclusive power over the management and investment of public pension funds and to ensure that the assets of public pension systems are used to provide benefits and services to participants efficiently and promptly. The authority claimed by the Board is not within these purposes.
We conclude the Board does not have plenary authority to evade the law that limits the pay of the Board and its employees, that specifies the employees exempt from civil service, and that authorizes the Controller to issue warrants and audit their legality.
FACTUAL AND PROCEDURAL BACKGROUND
The voters enacted the challenged provision as an amendment to Art. XVI, § 17, in 1992. The backdrop against which the amendment was enacted involved actions by the Governor and Legislature to balance the state budget by limiting or delaying the state's employer contributions to CalPERS.
For example, in 1982 legislation was enacted to bar the state from making a contribution for a portion of that year and to require the shortfall to be made up from the CalPERS reserve against deficiencies. (Claypool v. Wilson (1992) 4 Cal.App.4th 646, 655.) Until 1990, the state paid employer contributions on a monthly basis. (Board of Administration v. Wilson (1997) 52 Cal.App.4th 1109, 1119.) In 1990, the Legislature changed the payment schedule from monthly to quarterly. In 1991, the Legislature temporarily changed the payment schedule from quarterly to semiannually. In 1992 legislation "changed the schedule to `semiannually, six months in arrears.' Legislation in 1993 changed the schedule to `annually, 12 months in arrears.'" (Id. at p. 1117.) In 1991, legislation was passed to repeal statutes providing for cost of living benefits to retirees, and to use these funds to meet the state's employer contribution requirement. (Claypool v. Wilson, supra, at pp. 657-658.) Also in 1991, legislation was passed transferring the actuarial function to the Governor.
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