Wills

Introduction

In 1980 the City of Fresno discovered $39 million in unfunded liability in its pension cost of living adjustment fund (COLA). The COLA had always been a partially funded system. Independent actuaries recommended that the COLA be fully funded in light of then rampant inflation. The COLA enabling ordinance is silent as to whether it should be fully or partially funded.

Over $16 million of the unfunded liability accumulated from past services rendered by retired and active employees. The remaining unfunded debt would accrue in the future. The question presented in this case centers on whether the employees or the city must pay for the unfunded liability accrued from past services to create a fully funded COLA. The issue of whether payment must be shared depends on whether the employees have a vested right in the pension plan for the city to pay these moneys under the terms of the municipal code.

Facts and Proceedings Below

The City of Fresno adopted its current pension plan in 1939 by ordinance No. 2502. Beginning in 1942, the city has been charged with the duty of *784 making actuarial valuations of the entire retirement system. In 1965 the council passed…