The California Supreme Court’s headquarters in San Francisco at the Earl Warren Building and Courthouse. Photo via Wikimedia Commons

The state Supreme Court ruled Thursday that a San Diego citizens’ initiative that cut back city employee pensions was illegally placed on the ballot, and ordered a lower court to consider a remedy.

Proposition B, initially approved by voters in 2012, eliminated guaranteed pensions for new city employees, except police officers, and replaced those benefits with 401(k)-style retirement plans.

In 2015, one of the city’s largest public sector unions challenged the benefit system, alleging former Mayor Jerry Sanders and other officials illegally placed the measure on the ballot without conferring with labor groups. The Public Employment Relations Board ruled with the union, but the state’s Fourth District Court of Appeal reversed the decision in April 2017.

Now, the appeal court’s decision is overturned.

“We reverse the Court of Appeal’s judgment and remand for further proceedings to resolve issues beyond the scope of this opinion,” wrote Associate Justice Carol A. Corrigan in Thursday’s decision, in agreement with the other five justices.

In a statement, San Diego Mayor Kevin Faulconer, who supported pension overhaul as a city councilman, said the court’s decision doesn’t change the fact that more than 65 percent of voters supported the initiative.

“My administration will work closely with the city attorney’s office on the direction provided by the Supreme Court. The public mandate for reform is as valid now as it was when Proposition B passed in 2012, and I will insist that taxpayers continue to be protected as we move forward,” he said.

The court ruled that although it was a citizens’ initiative, Sanders’ support of Prop. B as policy warranted engagement with the unions under the Meyers-Milias-Brown Act, which gave city and county employees the right to collective bargaining in 1968.

Governing bodies “or other representatives as may be properly designated” need to engage with unions “prior to arriving at a determination of policy or course of action,” according to the act.

Sanders had previously said he supported the measure as a private citizen, not a public employee. The Supreme Court ruled that Sanders did use the power of his office to push the initiative, however.

“He consistently invoked his position as mayor and used city resources and employees to draft, promote and support the Initiative. The city’s assertion that his support was merely that of a private citizen does not withstand objective scrutiny,” Corrigan wrote.

In a statement, Sanders, now president and CEO of the San Diego Regional Chamber of Commerce, said further court action will be closely observed.

“Proposition B has been a resounding success that has allowed the city to reinvest in neighborhood services and public safety. It was critical to turning around the city’s finances at a time when the City was facing massive deficits, devastating cuts to core city services and downgrades in the city’s bond rating,” he said.

In overturning the Public Employees Relations Board ruling in 2017, the appeal court took an “unduly constricted view of the duty to meet and confer,” according to the Supreme Court ruling.

The Supreme Court ruled that the appeal court address an “appropriate judicial remedy” for the illegal placement of the initiative on the ballot.

The Public Employment Relations Board had previously ruled the city must pay employees “for all lost compensation” related to lost pension benefits, which would cost taxpayers millions of dollars.

Brian Pepin, president of the Lincoln Club of San Diego County, said in a statement that Prop. B had been a “resounding success” and turned the city’s finances around.

“On behalf of the people of San Diego, we will fight any attempt to overturn or undermine the will of the voters,” Pepin said.

The business-friendly club’s leader said it was on the “front lines” of pushing for Prop. B in 2012 “as skyrocketing pensions slashed city services, closed libraries and fire stations, and brought the city to the brink of financial disaster.”

“The Lincoln Club led the effort to bring pension reform directly to the people when the unions and politicians were unwilling to address this crisis, and we will do it again if needed,” Pepin said.

— City News Service contributed to this report.

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