SAN FRANCISCO (AP) - California violated employees' rights when it diverted $1.36 billion in pension contributions to balance the budget for two years, the state Supreme Court said in allowing a lower court ruling to stand.
The court's action May 28 means the state must repay the money to the California Public Employees' Retirement System.
The court unanimously denied review of an appellate ruling saying the diversion, although it did not affect employees' pension checks, violated their legal right to continuous, up-to-date funding of the pension system.
Justice Janice Rogers Brown, who before her court appointment was a legal adviser to Gov. Pete Wilson during the period of the pension dispute, took no part in the court's decision.
"The Supreme Court ruling is the end of the line," said H.D. Palmer, spokesman for the state Finance Department. He said it has not been determined when the money must be paid.
The dispute dates from 1992-'93 and 1993-'94, when the state faced multibillion-dollar revenue shortages and issued IOUs.
The Legislature, at the governor's urging, tapped the state's employer contributions into the employees' fund to help fill the budget gap. Contributions were ultimately delayed by a year, allowing the state to pay its share of the fund 12 months behind the original schedule.
The action was challenged by the retirement system, with the support of state employee unions.
Sacramento Superior Court Judge John Lewis ruled in 1995 the shift not only violated the state's legal duty to consult with the pension system's board but also interfered with the employees' constitutionally protected contract with their pension system. He ordered the state to return to on-time funding and restore the withheld amounts.
The 3rd District Court of Appeal upheld Lewis' ruling in a 3-0 decision in February.
State employees have a contractual right not only to the pension checks they have earned, but also to "an actuarially sound retirement system," said the opinion by Justice Richard Sims.
Quoting retirement system experts, he said the delay in payments created an ongoing shortfall in the pension fund.