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California appeals courts dismisses San Diego pension reform lawsuit

San Diego city at night

A California appellate court on Tuesday dismissed a lawsuit brought against the city of San Diego by the California Public Employment Relations Board, effectively upholding a 2012 proposition eliminating pension plans for new hires except police officers.

Under voter initiative Proposition B, new city employees will no longer be part of the $7.2 billion San Diego City Employees' Retirement System but placed in a separate defined contribution plan.

“By annulling the PERB's decision, the court of appeal cleared the way for the city to continue to enforce Proposition B,” according to a statement about the order on SDCERS' website. “SDCERS has been implementing Proposition B since its effective date and will continue implementing it pursuant to the recent court of appeal decision.”

Proposition B covers employees hired on or after July 20, 2012. Last year, the city of San Diego appealed a ruling of the state's public employment relations board that would have unwound the proposition.

“SDCERS staff will continue to monitor developments on the issue and work with the parties involved on the outcome of any further court proceedings,” the statement said.

In a separate statement, San Diego Mayor Kevin Faulconer applauded the appellate court's decision.

"The taxpayer protections and savings Proposition B generates are critically important, so I'm glad to see it upheld as the law of the land. Today, the court protected the clear will of the voters, reaffirming our ability to carry out the reforms in Prop B. … This ruling means we don't have to turn back the clock on pension reform,” Mr. Faulconer said.

Craig Gustafson, senior press secretary and director of media relations for the mayor said in an email that Proposition B would have no negative impact on SDCERS' unfunded liability.

“At the time, (Proposition B) was projected to save nearly $1 billion in future pension payments for the city. So it doesn't `worsen the funding' for SDCERS. New employees now have a 401(k) so they are not in that system anymore,” Mr. Gustafson wrote.