United Firefighters of Los Angeles City v. City of Los Angeles

In United Firefighters of Los Angeles City v. City of Los Angeles (1989) 210 Cal.App.3d 1095, the voters had approved cost of living adjustments for retired city employees in 1966. (United Firefighters, supra, 210 Cal.App.3d at p. 1101.) The adjustments were tied to the consumer price index and were initially capped at 2 percent, but a 1971 amendment eliminated the cap and allowed the adjustments to fully reflect the amount of inflation each year. (Ibid.) In 1982, the voters passed a charter amendment imposing a 3 percent cap on the cost of living adjustment. (Ibid.) The court concluded the 1982 amendment capping the annual adjustment impaired a vested contractual right to an uncapped adjustment because it "burdened employees with a disadvantage" while offering no comparable advantage such as reducing the amount of their pension contributions. (Id. at pp. 1102-1104.) The court rejected the city's argument the 3 percent cap was permissible as to employees hired before the "uncapping" of the cost of living adjustment in 1971, which was designed to protect the pensioners' purchasing power: "Once the cost of living adjustment was uncapped in 1971, plaintiffs did have a reasonable expectation that pension benefits earned thereafter would be fully adjusted for inflation and their post-retirement standards of living thus would be protected from any further diminution." (Id. at p. 1108.)