State can take back money from retired teachers, panel says

Teachers who got more retirement benefits than they were supposed to receive must return about eight years of that extra money to the state’s teacher retirement system, an appellate court ruled.

The ruling, published Tuesday by a 6th District Court of Appeal panel, contained good news and bad news for a group of 11 retired Monterey County teachers and the California State Teacher’s Retirement System, a $219 billion pension fund that provides benefits to 914,000 educators. Baxter v. California State Teacher’s Retirement System, H042680.

“It was a mixed decision that does allow [the California State Teacher’s Retirement System] to go back in time” to recoup payments, said Joshua E. Morrison, senior counsel at Atkinson, Andelson, Loya, Ruud & Romo APC, who was not involved in the case and is an expert in public employment retirement disputes.

The retirement system got an unprecedented ruling on the statute of limitations in the state’s education code, Morrison noted, and that could allow it to fix several overpayment problems.

But tucked in the 50-page opinion written by Brian C. Walsh, the presiding judge of the Santa Clara County Superior Court who was sitting by designation, is language that Monterey County and other county education offices are ostensible agents of the state retirement system, making the state entity accountable for county decisions.

In previous disputes, the state retirement system “has attempted to walk away from communications between county offices and school districts and say, ‘That wasn’t us,’” Walsh wrote.

The opinion remanded the case to Monterey County Superior Court Judge Thomas C. W. Wills, and does not spell out how the state retirement system will take back the money, though a footnote indicated it could be through prospective payments.

The Salinas Unified High School District decided 18 years ago to give teachers extra money and benefits if they taught an extra class.

In 2005, a memorandum was sent to the Monterey County education office warning that the retirement and benefit tier created for teachers who taught six, instead of the usual five periods, resulted in excessive benefits. Then, in 2008, the state retirement system was told in an audit of the same problem.

Not until 2012 did the state retirement system take action and reduce the payments. But 11 teachers fought the reduction and Wills, the trial court judge, ruled the state retirement system exceeded the three-year statute of limitations

The appellate panel agreed with Wills’ interpretation of when the statute of limitations clock started ticking. The justices said that it started back in 2005, when the county education office was first told of possible overpayments.

However, Walsh wrote, the continual accrual theory applied to the retirement system’s recoup attempt. That means overpayments from three years before action was taken — in 2012 — could be returned to state coffers.

It is not clear what next steps will result in Baxter, or other cases where the state may use the continual accrual theory to get back benefits. Messages left with the system’s lead outside counsel, Robert J. Stumpf Jr,, partner at Sheppard, Mullin, Richter & Hampton LLP, were referred to a state spokesperson who did not return a message Wednesday.

The lawyer for the teachers Sergio H. Parra of L&G LLP said that he had not digested the full ruling. “We are reviewing our options,” Parra said, adding that the ruling seemed to present, “favorable points for both sides.”