Is the headline-grabbing conflict between the City of Santa Ana and Santa Ana Police Officers Association President simply a bitter disagreement over Serrano’s pension? Or is a broader public policy issue involved that impacts statewide other government jurisdictions and public employee labor organizations?
The intensity of the rancor between the city administration and the police union has fueled the perception it is the former. But peel away the very real acrimony and the core of the dispute is more prosaic, stemming from a CalPERS reinterpretation of existing law regarding “full-time release” employees that has broad policy implications beyond Serrano’s situation, and could impact hundreds of similarly situated government employees and retirees.
What Is “Full-Time Release”?
“Full-time release” is the term for public employee union presidents who are on leave of absence – “released” – from their ordinary duties while serving as heads of their bargaining units. This work assignment can only be created and approved by the employer. Some would argue any assignment outside their original position is technically full-time release. For example, local law enforcement personnel who are released full-time to work with external task forces like the FBI or other regional work assignments.
The Santa Ana Police Officers Association is one of hundreds of public employee unions in the state with full-time release presidents. Other police unions with full-time release presidents include the Association of Orange County Deputy Sheriffs, the Anaheim Police Association, and the Long Beach Police Officers Association, to name a few.
Among other rules pertaining to full-time release positions, the law stipulates such employees continue to accrue retirement credit while assigned to that work assignment.
Conservative policy makers are critical of this particular institution, believing it unfairly empowers government unions at the expense of taxpayers and public services.
Union leaders see it differently.
“These work assignments exist throughout the state and are created by the employer in accordance with state laws and contractual agreements. These positions provide essential services to the employer, public employees and the communities we all serve,” says Todd Baldridge, president of the Orange County Professional Firefighters Association.
A common misperception is full-time release presidents are being paid by their respective jurisdictions even though they aren’t on the job. In actual practice, union members each contribute a specified amount to reimburse the city or county for the president’s salary and benefits, according to state law.
Looked at another way, if Serrano resigned as SAPOA president and returned to active policing, the union members’ reimbursement would end and the city would resume paying his salary and benefits.
Under federal and state law, cities are required to administer health benefits for their full-time employees. For the past 30 years, Santa Ana has delegated administering of SAPD officers’ benefits to the union president.
Serrano argues this arrangement has saved the city millions of dollars over the course of three decades.
“If the SAPOA president was not administering the benefits program,” says Serrano, “it would have to hire additional employees to do so. Even if you assume those employees were paid mid-level compensation, the total cost to city taxpayers over 30 years would be huge.”
CalPERS Ruling Injects Uncertainty Into Full-Time Release Rules and Pensions
Among other rules pertaining to full-time release positions, Section 3558.8 stipulates such employees continue to accrue retirement credit while on full-time release. And this is the crux of the issue.
The City of Santa Ana and the SAPOA have traditionally negotiated MOUs which provided for the POA president to receive “confidential pay” for administering officers’ benefits program. Under the present MOU, Serrano receives about $57,000 a year in confidential pay – which is to be included in his retirement pay calculations – subject to CalPERS approval. Serrano’s total compensation is roughly equivalent of a police lieutenant, while the scope of his work assignment as POA president is more akin to an entry level manager.
For years, the full-time release MOUs between the city and the SAPOA treated the POA president’s “Confidential Premium” as part of their pensionable compensation. Serrano’s predecessor as POA president, John Franks, had the same agreement, and it was deemed pensionable for him. Franks’ two predecessors also had special compensation agreements with the city for benefits program administration. When Serrano became POA president, that arrangement continued.
In October 2020, a few years into Serrano’s tenure as president, CalPERS upended that by ruling it was now longer pensionable according to Public Employee Retirement Law.
The issue at hand is governed by sections of state law: Government Code Sections 3558.8 and 20636.
According to Section 20636, under a mutually-agreed upon Memorandum of Understanding, an employer – in this case Santa Ana – can pay an employee “special compensation” – which includes a “payment received for special skills, knowledge, abilities, work assignment, workdays or hours, or other work conditions.” Serranos’ “Confidential Premium” pay falls under this category.
The section limits such special compensation to “that which is received by a member pursuant to a labor policy or agreement or as otherwise required by state or federal law, to similarly situated members of a group or class of employment that is in addition to payrate.”
However, in its ruling CalPERS states that the confidential pay was not available to “similarly situated employees of a group or class” – and that even if it was, it is not pensionable if received by an employee on leave of absence.
The dispute turns in large part on what a “similarly situated member” is.
That section was traditionally understood to define “group or class of employment” as the entire bargaining unit – in Serrano’s case, the SAPOA. Since the premium pay is being received by an SAPOA member – Gerry Serrano – and each union member can, in theory at least, be union president and therefore “available” to receive the premium pay, that pay is pensionable under the traditional reading of the code.
Serrano’s attorney argues CalPERS’ ruling misapprehends the meaning of Section 20636.
“The ‘group or class of employment’ to which Sgt. Serrano belongs is his entire bargaining unit of police officers serving the City of Santa Ana,” contends Steve Kaiser of Messing, Adam and Jasmine in a March 28, 2022 letter to CalPERS.
“Therefore his Confidential Premium pay is received by ‘a member’ (Serrano) pursuant to a labor agreement (the MOU) which is available to similarly situated members of the group or class – i.e. the uniformed officers,” writes Kaiser.
He claims that according to the logic of the CalPERS ruling means “everyone would be required to receive K9 Pay, Detective Pay, Confidential Pay or any other special assignment pay to receive pension credit.”
Kaiser points out those are examples of many types of special compensation in police work, and argues that under the ruling’s logic, Santa Ana “must assign everyone in the bargaining unit to these assignments for them to be pensionable” for anyone.
City Goes From Collaborative To Combative
Serrano, understandably, objected to the CalPERS changed stance, given the expectation upon becoming POA president that his confidential pay would be deemed pensionable under the current MOU and according to decades of past practice.
The city also objected and filed an appeal of the CalPERS ruling. It also entered into discussions with Serrano to explore alternatives, such as a “side letter” that would permit his confidential pay to be included in his pension calculations. The city even requested an opinion from the state Fair Political Practices Commission to ensure the state law permitted such discussions; the FPPC advised that it did.
At some point, however, the city became adversarial. Serrano contends the change in the city’s attitude came in the wake of the SAPOA’s successful recall of Councilmember Cecilia Iglesias, a conservative Republican and outspoken critic of the police union. A rift opened and hardened into bitter, open political and legal warfare between Serrano and the city leadership.
In the meantime, an administrative law judge denied the appeal to treat the confidential pay and all other special pays as pensionable resulting in a loss of almost 50% of Serrano’s expected and negotiated pension.
When Santa Ana Councilmember David Penaloza was asked about this agreement and Calpers issue, he said, “The city has an obligation to all city employees serving our community. Any employee in any department, past or present, assigned to a work assignment created by the city should not be penalized or treated differently than any other city employee.”
Legislators Say CalPERS Acting Contrary to Intent Of the Law
Legislators who actually voted on SB 1085, the operative state legislation, have taken issue with CalPERS’ ruling, saying CalPERS is acting contrary to the law’s intent.
In a May 14, 2021 letter, Senators Tom Umberg and Bob Archuletta and Assemblymembers Tom Daly, Sharon Quirk-Silva and Freddie Rodriguez vigorously disagreed with CalPERS’ ruling, telling its Board and CEO Marcie Frost their ruling was “inconsistent with the clear language and legislative intent of the controlling statutes” and “contrary to past practice and the law.”
“By excluding the previously-included special compensations used to determine the employee’s expected pension payments, CalPERS is acting in violation of Government Code 3558.8,” the legislators affirm.
Regarding CalPERS’ claim that the confidential premium specified in the MOU, the legislators advised the law “is clear and unambiguous” and requires the city to allow union officials like Serrano to “fulfill their union responsibilities without loss of compensation or benefits.”
“The loss of compensation, including special compensation, previously provided but now revoked due to the qualified public employee’s status and work assignment as union president is the very type of harm that [SB 1085] was implemented to prevent.”
The letter points out that CalPERS’ has routinely included special compensation such as Serrano’s confidential premium in their pension calculation, and the passage of SB 1085 merely “codifies CalPERS’s past practice” and “explicitly allows an employer to pay special compensation” for an agreed-upon work assignment in a labor agreement. This would presumably include the benefits administration duties contracted by Santa Ana to the SAPOA president per their MOU.
Broader Impacts And Potential Legislative Fix
The dispute goes beyond Serrano’s pension situation, with obvious implications for hundreds of public employees on full-time release under similar MOUs with their jurisdictions.
In 2012, a Davis firefighter retired after nearly 30 years twice asked CalPERS for an official estimate of his retirement pay, and ultimately decided to retire based on the information he was given. Five years later, CalPERS changed its mind, ruled that some of the firefighter’s compensation – negotiated in good faith with the city – was not pensionable, and demanded the retiree pay back $42,000.
Whether or not one believes public employee pensions are too generous and expensive, the hundreds of government employees on or considering full-time release are making decisions about their financial future that based on past practice and legislative intent that may be upended by a CalPERS ruling.
Last year, state Senator Connie Leyva introduced SB 278. According to the Senate floor analysis, the bill provides that in cases where “a retiree’s California Public Employees’ Retirement System (CalPERS) pension is reduced post-retirement, due to the inclusion of compensation agreed to under a collective bargaining agreement that CalPERS later determines to be non-pensionable, the public employer must cover the difference between the pension as originally calculated and as reduced by CalPERS.”
“In some cases,” states the bill’s author, “employers have reported retired employee information to CalPERS that is disallowed under the CalPERS plan. Even though this pay item was bargained and paid for by the employer and employee, if it is subsequently disallowed, the retired employee is ultimately required to pay back the overpaid amount and suffer a permanent reduction in future payments.”
In effect, the bill states that if a union and a public agency sign an agreement saying specified special compensation is pensionable, CalPERS cannot later rule that it isn’t.
SB 278 garnered the support of a long list of public employee unions, and the opposition of a coalition of associations representing a range of public agencies. It passed the legislature virtually unopposed and was signed by the Governor last September.
Ultimately, the fate of whether Serrano’s confidential pay is, as he was given every reason to believe, is pensionable, remains in the hands of CalPERS. How the dispute is resolved will have potentially far-reaching ripple effects for potentially thousands of current and retired public employees in California.
