State ex rel. Pension Obligation Bond Committee v. All Persons Interested In re of the Validity of the California Pension Obligation Bonds to be Issued

The State of California (the State), through its Pension Obligation Bond Committee (the Committee), brought this action pursuant to Government Code section 16934 and Code of Civil Procedure section 860 et sequitur to obtain a declaration of the validity of recent legislation authorizing the issuance of bonds under certain limited circumstarices to finance the State’s employer obligation to fund pensions. The Committee argued the bonds fall within an exception to a state constitutional limitation on the creation of new debt (Cal. Const, art. XVI, § 1; unspecified article references that follow are to the California Constitution) for debts incurred to meet an obligation imposed by law. According to the Committee, the obligation to fund employee pensions is one imposed by law within the meaning of this exception.

The trial court disagreed with the Committee, concluding the pension obligation is one imposed by the State on itself and, therefore, does not fall within an exception for obligations imposed by law. The court entered judgment against the Committee.

We agree the bonds are not exempt from the constitutional debt limit and affirm the judgment.

Statutory and…