In a strongly-worded letter dated June 21, 2011 to Mayor Reed and the City Council, local retired San Jose city attorney Joan Gallo expressed bewilderment at why the City of San Jose would undertake an action which clearly violates the contract clause of the California and United States Constitutions.
Citing key California Supreme Court cases, Gallo writes the the court has held that pension rights are an integral portion of compensation which cannot be changed once they have vested and with respect to active employees, some limited modification of vested pension rights has been allowed by the resulting disadvantage to employees must be accompanied by comparable new advantages.
Under Mayor Reed's pension reform proposal - which now is slated to be an issue before the voters of San Jose next June - cost of living adjustments (COLAs) could be frozen under a declaration of a fiscal emergency for up to five years.
In her letter to the Mayor and City Council, Gallo takes aim at the issue of COLA freezes by demanding to know on what legal authority the Mayor is relying on.
"Have your lawyers given you any authority that says you can enact a change in retiree COLAs? Have they provided some case authority that emergency modifications can continue beyond the period of an actual inability to appropriate the funds to pay the retirees as required?"
Gallo states in her letter that placing restraints on COLAs in the Charter "only diminishes any argument that the change is justified by a state of emergency and that it underlines the fact that the goal of such restraints is to create permanent restructuring" which, in Gallo's opinion, is "not a justification for diminishing vested rights."
In a warning to Mayor Reed, Gallo points out that the City could be facing potentially huge costs as a direct result of the litigation should there be a successful ballot measure reducing retiree COLA benefits and that Mayor Reed will have to pay outside attorneys their fees regardless of the outcome.
"If the enforcement of the ballot measure were not immediately enjoined and you lose the litigation (which seems to me to be inevitable with regard to current retirees), there will be interest owed to all of the individual retirees."
Gallo also goes on to point out that such claims would be constitutionally based and that Mayor Reed may have to pay the attorney's fees of the retiree plaintiffs.
"Inviting this litigation seems very short sighted to me," Gallo writes.
In the closing of her letter, Gallo urges the Mayor and City Council to consider their legal position as well as the detriment to loyal long term staff.
