OLSON v. CORY

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Court of Appeal, Second District, Division 2, California.

Lester E. OLSON, Robert L. Bostwick, Kenneth Williams, Pat Mullendore, Newell Barrett, Roberta Ralph, Lawrence E. Drumm, Vincent N. Erickson, Maurice J. Hindin, Thomas A. Newell, Benjamin Landis, M. Peter Katsufrakis, Kathleen D. Kurland, and all others similarly situated, Plaintiffs and Respondents, v. Kenneth CORY as Controller of the State of California, Mark H. Bloodgood as Auditor-Controller of the County of Los Angeles, Defendants and Appellants.

Civ. 53608.

Decided: June 11, 1979

Jerome B. Falk, Jr., Ann Brick, Howard, Prim, Rice, Nemerovski, Canady & Pollak, San Francisco, for defendants and appellants. Kenneth Cory, Controller of the State of California. William H. Levit, Stroock & Stroock & Lavan, Gibson, Durn & Crutcher, Richard Chernick, Wayne W. Smith, Daniel Q. Callister, Los Angeles, for plaintiffs and respondents.

Declaratory Relief. The question is whether elimination of a prospective cost-of-living increase in judicial salaries reduces those salaries in violation of the California Constitution or impairs the obligation of contracts by infringing vested or accrued rights.

In September 1976 the Legislature amended existing law to eliminate the prospective cost-of-living increase in judicial salaries scheduled to take effect in 1977 and to restrict future annual cost-of-living increases starting in 1978 to a five percent maximum. During the year 1976 the California consumer price index increased by 5.427 percent. After the Controller announced he would follow the provisions of the newly-amended law and refuse to pay the increased judicial salaries called for by the former law, plaintiffs, who are active judges, retired judges, and judicial pensioners, brought a class action in declaratory relief against defendant Controller seeking a declaration that the newly-amended law is unconstitutional.

The relevant statutory and constitutional provisions are:

California Constitution, article III, section 4:

“Salaries of elected state officers may not be reduced during their term of office. Laws that set these salaries are appropriations.”

California Constitution, article VI, section 19:

“The Legislature shall prescribe compensation for judges of courts of record.”

Government Code, section 68203, as it read prior to its 1976 amendment:

“. . . on the effective date of the 1969 amendments to this section and on September 1 of each year thereafter the salary of each justice and judge named in Sections 68200 to 68202, inclusive, shall be increased by that amount which is produced by multiplying the then current salary of each justice or judge by the percentage by which the figure representing the California consumer price index as compiled and reported by the California Department of Industrial Relations has increased in the previous calendar year.”

Government Code, section 68203 after its amendment on September 22, 1976:

“On July 1, 1978, and on July 1 of each year thereafter the salary of each justice and judge named in Sections 68200 to 68200, inclusive, shall be increased by that amount which is produced by multiplying the then current salary of each justice or judge by the percentage by which the figure representing the California consumer price index as compiled and reported by the California Department of Industrial Relations has increased in the previous calendar year, but not to exceed five percent (5%).” (Adopted September 22, 1976, effective January 1, 1977.)

The trial court declared the 1976 amendment (1) invalid for judges serving current terms of office as an unconstitutional reduction in salary, (2) invalid for retired judges and judicial pensioners as an impairment of the obligation of contracts, (3) inseverable in its application to new judges from its application to sitting judges and judicial pensioners. As a consequence the court adjudicated the 1976 amendment invalid in its entirety.

Plaintiffs support the adjudication of the trial court with three legal arguments:

(1) The amendment to section 68203 reduces the salaries of judges during their term of office, contrary to article III, section 4, of the California Constitution.

(2) In changing the rights of judicial pensioners the amendment impairs the obligation of contracts, in violation of both state (article I, section 9) and federal (article I, section 10), constitutions.

(3) Even if the reduction in judges' salaries could be applied to judges who entered their term of office after January 1, 1977, the Legislature did not intend to create two classes of judges performing identical services at different rates of salary. Severance of the valid from the invalid portions of the amendment was not contemplated under the statute, and hence the entire amendment falls.

More generally, plaintiffs argue that judges who served during the period 1969 to 1976 and whose terms of office continued beyond 1976 served under the protection of a cost-of-living adjustment statute, whose provisions formed a valuable part of their compensation which could not be taken from them during their term of office or after their retirement.

The defendant controverts each of these arguments.

We evaluate the issues somewhat differently from the parties and will discuss them under the following headings:

(1) Do judicial pensioners possess an independent basis from that of active judges for attacking the amendment to section 68203?

(2) Does amended section 68203 amount to a reduction in salary contrary to article III, section 4, of the California Constitution?

(3) Does amended section 68203 impair the obligation of contracts by infringing vested or accrued rights in violation of the state and federal constitutions?

I

PRELIMINARY MATTERS

1. Members of this court may adjudicate the cause even though each is financially interested in the outcome of the litigation. Ordinarily, a justice may not pass judgment on any cause in which he has a personal interest, but when all justices in the state are, or may be, financially interested in the outcome, any of them may sit. (Evans v. Gore (1920) 253 U.S. 245, 40 S.Ct. 550, 64 L.Ed. 887; Atkins v. United States (Ct.Cl.1977) 556 F.2d 1028, 1035-40, cert. denied (1978) 434 U.S. 1009, 98 S.Ct. 718, 54 L.Ed.2d 751; Caminetti v. Pac. Mut. L. Ins. Co. (1943) 22 Cal.2d 344, 366, 139 P.2d 908; Brenkwitz v. City of Santa Cruz (1969) 272 Cal.App.2d 812, 818, 77 Cal.Rptr. 705; Barkin v. Board of Optometry (1969) 269 Cal.App.2d 714, 719-20, 75 Cal.Rptr. 337; Gonsalves v. City of Dairy Valley (1968) 265 Cal.App.2d 400, 404-05, 71 Cal.Rptr. 255.) In such instances courts function under a rule of necessity, which means that disqualification of all judges disqualifies none. The application of this rule has been discussed at length in Atkins v. United States, supra, a class action on behalf of all federal judges to recover additional compensation for their services as judges, and the exhaustive discussion of the issue in Atkins (pp. 1035 to 1040) makes further discussion here unnecessary. Under the rule of necessity this court, to which the cause was transferred by the California Supreme Court, is both qualified and obligated to decide the cause.

2. Judges of the Supreme Court, the courts of appeal, the superior courts, and the municipal courts are elected state officers. (Cal.Const., art. VI, ss 1, 16.)

3. The 1976 amendment to section 68203 brought about no absolute reduction in the dollar amount of any judicial salary or pension and operated only in respect to future increases.

4. No claim is made that judges are constitutionally entitled to cost-of-living increases to offset the effects of inflation and preserve the purchasing power of their salaries. Such an argument was recently made on behalf of federal judges and rejected by the United States Court of Claims in Atkins v. United States (Ct.Cl.1977) 556 F.2d 1028, cert. denied (1978) 434 U.S. 1009, 98 S.Ct. 718, 54 L.Ed.2d 751. Judges, like others, must take their chances with inflation (at least to the point at which inflation makes nominal the purchasing power of their salaries), and judges must share in the general hardships that result from a depreciating dollar. (Cf. Myers v. English (1858) 9 Cal. 341, 342, 344, Legislature may require payment of judges' salaries in paper instead of gold.)

II

RECENT HISTORY OF JUDICIAL SALARIES

Until 1964 judicial salaries were fixed in specified amounts by legislative act. For example, Government Code section 68200 set out the annual salary of the Chief Justice of California in a specified amount, and sections 68201 and 68202 did the same for other judges.

But in 1964 the Legislature passed Government Code section 68203, which provided for automatic increases in judicial salaries every four years, starting September 1, 1968, based upon increases during the period in per capita personal income in California. (Gov.Code, s 68203, Stats. 1st Ex.Sess.1964, ch. 144, s 4, p. 518.) In 1969, section 68203 was amended to provide annual salary increases based on increases in the California consumer price index during the preceding year (Stats.1969, ch. 1507, s 1, p. 3086). Because the annual increase took effect on September 1, an eight-month time lag resulted. The operation of these provisions brought judicial salaries to the following levels on September 1, 1976:

On September 22, 1976, the Legislature amended Government Code sections 68200, 68201, and 68202 to set out these amounts of salary, and at the same time it amended section 68203 (Stats.1976, ch. 1183, s 4, p. 5287, effective January 1, 1977) to freeze judicial salaries until July 1, 1978 and put a five percent maximum on all subsequent annual cost-of-living salary increases. The amendment thus eliminated the 1976 cost-of-living increase scheduled to take effect September 1, 1977, changed the effective date of future salary adjustments from September 1 to July 1, and restricted future cost-of-living increases to a maximum of five percent.

III

DO JUDICIAL PENSIONERS POSSESS AN INDEPENDENT BASIS FOR ATTACKING SECTION 68203?

We first consider the claims of the judicial pensioners, who argue in essence that during their period of service as judges from 1969 to 1976 the statutory provision for an annual cost-of-living increase became part of the contract under which they performed services and created a vested pension right to future cost-of-living protection against inflation, a right which they carried into retirement. The protection given them by a cost-of-living statute, they argue, constituted a valuable part of their pension rights, which could not be taken from them after their retirement. Their pension rights vested at the time of their retirement under the terms of the statute as it then existed, they assert, and any subsequent change to their disadvantage amounts to an impairment of the obligation of contracts in infringement of a vested or accrued right.

It is unclear whether the argument of the judicial pensioners applies solely to those who became pensioners during the period 1969 to 1976, whether it extends to all retired judges who served during the period, or whether it extends to all retired judges regardless of period of service. But in none of these instances do we believe their points well-taken. In our view judicial pensioners have no vested rights separate and apart from those possessed by judges who served during the period 1969 to 1976 and who continued to serve thereafter. The rights of judicial pensioners derive from the Judges' Retirement Law (Gov.Code, ss 75,000 ff.; cf. Allen v. City of Long Beach (1955) 45 Cal.2d 128, 287 P.2d 765; Terry v. City of Berkeley (1953) 41 Cal.2d 698, 263 P.2d 833; Kern v. City of Long Beach (1947) 29 Cal.2d 848, 179 P.2d 799; Lyon v. Flournoy (1969) 271 Cal.App.2d 774, 76 Cal.Rptr. 869), which since 1953 has authorized and provided pensions based on specified percentages of current judicial salaries. (Gov.Code, ss 75032, 75033, 75033.5, 75034, 75076, 75077.) The judicial pension is a fixed proportion of the current judicial salary for the office the pensioner or a deceased spouse formerly held. Thus the Judges' Retirement Law establishes what is commonly referred to as a floating or “fluctuating pension which increases or decreases as the salaries paid to active employees increase or decrease.” (Eichelberger v. City of Berkeley (1956) 46 Cal.2d 182, 185, 293 P.2d 1, 2.) As a consequence, the fortunes of judicial pensioners are irrevocably tied to the fortunes of the judges themselves.

Plaintiff pensioners contend that, regardless of the application of the 1976 amendment to sitting judges, the pensions of judicial pensioners must be computed by reference to the hypothetical salaries that would have become payable to active judges in the absence of the 1976 amendment. They argue that the 1969 amendment of section 68203 created an enforceable expectation that judicial pensions would increase annually with increases in the cost-of-living, thereby assuring judicial pensioners continuing protection against the ravages of inflation. Their argument requires some brief discussion of the nature of rights of judicial pensioners under the Judges' Retirement Law.

We start with the premise that judicial pensions are vested rights. (Kern v. City of Long Beach (1947) 29 Cal.2d 848, 851, 856, 179 P.2d 799.) But when the pension is a floating or fluctuating pension, “the right which (is) vested is the right to have the pension, not of a particular number of dollars, but ‘equal to (a percentage) of the amount of salary attached to the rank,’ whether it should be more or less than that attached to the rank when the contract of employment was made.” (Casserly v. City of Oakland (1936) 6 Cal.2d 64, 68, 56 P.2d 237, 239.) Here the vested right i. e., the enforceable expectation to which retired judges are entitled is a right to have pensions continue as a function of salaries paid to active judges. Under the fluctuating pension system of the Judges' Retirement Law, judge's pensions increase proportionately with increases in the salaries of active judges. (Casserly v. City of Oakland, supra; Eichelberger v. City of Berkeley (1956) 46 Cal.2d 182, 293 P.2d 1.) Problems that arise on the change of a pension system from a fluctuating system to a fixed one are not present here. (See, e. g., Terry v. City of Berkeley (1953) 41 Cal.2d 698, 263 P.2d 833; Allen v. City of Long Beach (1955) 45 Cal.2d 128, 287 P.2d 765; Abbott v. City of Los Angeles (1958) 50 Cal.2d 438, 326 P.2d 484.) At bench, as in Casserly v. City of Oakland, supra, the statute which created the right to a pension made the amount of the pension dependent upon current salaries of active judges. Any permissible change in those salaries (other than an absolute reduction in dollar amount), whether a change in existing salary scales or a reduction in provisions affecting future cost-of-living increases, effects a permissible change in the amount of judicial pensions.

Plaintiffs rely on cases which impose limits on the power of the State to revise a pension system as it applies to retired employees or to active employees who are accruing pension rights. Those cases protect active and retired employees against unreasonable modifications of a pension system by limiting revisions to reasonable changes that do not infringe on vested rights. (Betts v. Board of Administration (1978) 21 Cal.3d 859, 148 Cal.Rptr. 158, 582 P.2d 614; Allen v. City of Long Beach (1955) 45 Cal.2d 128, 287 P.2d 765; Lyon v. Flournoy (1969) 271 Cal.App.2d 774, 76 Cal.Rptr. 869.) But revision, even when substantial, is not precluded. A case in point is Miller v. State of California (1977) 18 Cal.3d 808, 135 Cal.Rptr. 386, 557 P.2d 970, where a state employee entered public service at a time the mandatory retirement age was 70. More than 30 years after his entry into state service the mandatory retirement age was lowered to 67, thereby compelling the employee's retirement three years earlier than he had anticipated. If he had not been forced to retire at 67 and if he had been able to serve another three years, his ultimate pension would have been approximately 25 percent higher. The employee argued he had a vested contractual right to remain in state service until age 70 and that reduction in the mandatory retirement age impaired his vested contractual right to earn a higher pension. The court rejected both arguments, concluding that the state has authority to make reasonable modifications in its pension plan before the pension becomes payable, and that until retirement an employee does not have a right to particular vested benefits but only to a reasonable pension. Although the employee was entitled to earn increased pension benefits as long as he was employed, he had no vested contractual right to continue in state employment for any specified period of time. “(T)he power of the Legislature, unfettered by contract, reduced the mandatory age of retirement and thereby created the condition subsequent whose occurrence not only terminated plaintiff's employment but also defeated his expectation of additional salary and a larger retirement allowance.” (Miller, supra, at p. 817, 135 Cal.Rptr. at p. 391, 557 P.2d at p. 975.) At a minimum the case stands for the proposition that the thwarting of expectation of future accrual of an increased pension does not infringe present vested right.

Plaintiffs urge that revisions of current salaries paid to sitting judges, revisions which indirectly affect the rights of retired judges entitled to floating pensions, are to be treated as though they were amendments to the pension law itself. Unquestionably, the underlying objective of a fluctuating pension system is to enable retired judges “to maintain a fairly constant standard of living despite fluctuations in living costs” during an inflationary period. (Lyon v. Flournoy (1969) 271 Cal.App.2d 774, 783, 76 Cal.Rptr. 869, 876; see also Allen v. City of Long Beach (1955) 45 Cal.2d 128, 132, 287 P.2d 765.) Nevertheless, judicial pensioners are dependent “upon the salary-fixing authority's willingness to adjust the salaries of active (judges) to inflationary price trends.” (Lyon v. Flournoy, supra, 271 Cal.App.2d at p. 784, 76 Cal.Rptr. at p. 876.) Nothing in the Judges' Retirement Law itself requires salaries of active judges to be raised in order to provide more adequate pensions for judicial pensioners. As pointed out in Lyon v. Flournoy, supra, where pensions are tied to salaries currently being paid “(a)n unwilling employer may refuse to raise salaries. Possessing a free choice, unbound by contract, to grant or deny salary raises to active employees, the same choice, unfettered by contract, extends to the allowances of retired employees.” (Id. at p. 784, 76 Cal.Rptr. at p. 876.) Thus the only legitimate expectation raised by such a pension plan is that pensioners will not be treated differently from active judges.

Agreeing with this reasoning, we conclude that the promise made by the Judges' Retirement Law to judicial pensioners is that their pensions will vary in specified direct proportions with the salaries payable to active judges. The fortunes of judicial pensioners are irrevocably tied to those of active judges and, absent any absolute reduction in dollar amounts of pension, pensioners have no independent ground to complain about amounts of salary payable to active judges.

IV

DOES THE AMENDMENT TO SECTION 68203 CONFLICT WITH THE CONSTITUTIONAL PROHIBITION AGAINST REDUCTION IN SALARIES?

Before discussing this constitutional issue we first note the general considerations that lead to constitutional prohibitions against reductions in the salaries of judicial officers during their term of office. The key objective is to create and maintain an independent judiciary, and the key factors thought to bring this about are security of tenure and security of subsistence. Both factors appear in the federal constitution, which declares that judges shall hold office during good behavior and receive a compensation which shall not be diminished during their continuance in office. (U.S.Const., art. III, s 1.) As observed by the Supreme Court in Evans v. Gore (1920) 253 U.S. 245, 252, 40 S.Ct. 550, 552, 64 L.Ed. 887, in turn quoting Hamilton in The Federalist, No. 79, “(a) power over a man's subsistence amounts to a power over his will.” That court further noted the constitutional premise that protection of a judge's subsistence is not so much for the benefit of the judge as it is for the public interest in the preservation of an independent judiciary. (Evans v. Gore, supra, at pp. 248-54, 40 S.Ct. 550.)

These basic constitutional premises find expression in the California Constitution, which gives judges the protection of relatively-long fixed terms (appellate judges, 12 years; trial judges, 6 years (art. VI, s 16)) and which prevents reductions in judges' salaries during their term of office (art. III, s 4).

Factually, reductions in judicial salary may come about in four different ways:

(1) Reduction in dollar amounts of judicial salaries.

(2) Increased specific deductions against judicial salaries.

(3) Increased general deductions against all salaries.

(4) Reduction in purchasing power of all salaries.

Clearly, if the Legislature had undertaken to reduce the dollar amounts payable as salaries to judges (item 1), or had undertaken to deduct increased amounts from judicial salaries for pension contributions or the like and thereby brought about an absolute reduction in judges' salaries (item 2), the constitutional prohibition against reduction in salary during a judge's term of office would come into play. (Cf. Abbott v. City of Los Angeles (1958) 50 Cal.2d 438, 451, 326 P.2d 484.) Neither of these events has occurred. Nor has any complaint been made of reduction in judicial salaries as a consequence of a general tax imposed on all salaries (item 3), which was the issue in Evans v. Gore (1920) 253 U.S. 245, 40 S.Ct. 550, 64 L.Ed. 887, the case which exempted the salaries of federal judges from the then newly-imposed general income tax. The reduction complained of here is related to the loss in purchasing power for all salaries (item 4). Plaintiffs do not directly complain of loss of purchasing power in judges' salaries as a result of inflation and the depreciating value of the dollar, the issue unsuccessfully raised in Atkins v. United States (Ct.Cl.1977) 556 F.2d 1028, cert. denied (1978) 434 U.S. 1009, 98 S.Ct. 718, 54 L.Ed.2d 751, but they present the point in indirect form by arguing that removal during an inflationary period of statutory protection against increases in the cost-of-living constitutes a reduction in salary contrary to article III, section 4 of the California Constitution. Plaintiffs argue that sitting judges during 1969 to 1976 had a legal expectation of annual increases in salary commensurate with increases in the cost-of-living as shown by the California consumer price index, a legal expectation that constituted a valuable part of their compensation, and that any diminution in the amount of such increases during their term of office effected an unconstitutional reduction in salary. Plaintiffs conclude that article III, section 4, which forbids reduction in salary during a judge's term of office, likewise forbids modification of future salary increases called for under an automatic cost-of-living formula.

Of equal general importance to this cause is another provision of the California Constitution, article VI, section 19, which authorizes the Legislature to prescribe compensation for judges of courts of record. That provision confers on the Legislature “the fullest measure of control, direction, ordination, and dictation over the matter of the amount and payment of judicial salaries . . . .” (Sevier v. Riley (1926) 198 Cal. 170, 175, 244 P. 323, 325.) Absent some constitutional or statutory provision to the contrary, the salaries of all public employees, including judges, may be modified by legislative action. No officer or employee of the State of California has an immutable vested right to any specific salary. (Butterworth v. Boyd (1938) 12 Cal.2d 140, 150, 82 P.2d 434; Miller v. Kister (1885) 68 Cal. 142, 144, 8 P. 813; cf. Miller v. State of California (1977) 18 Cal.3d 808, 813, 135 Cal.Rptr. 386, 557 P.2d 970.)

Plaintiffs' constitutional challenge to the 1976 amendment to section 68203 asserts that article III, section 4, which prohibits any reduction in the Salaries of elected state officers during their term of office, not only qualifies the Legislature's plenary power to adjust current judicial salaries but prohibits legislative adjustment during a judge's term of office in the cost-of-living formula established in 1969 by section 68203. In opposition, defendant argues that the legislative attempts in 1964 and 1969 to solve the perennial controversy over judicial salaries by adopting a cost-of-living formula to determine future judicial salaries, did not bind the Legislature to maintain indefinitely any particular cost-of-living formula for future judicial salaries. The constitutional issue posed is whether the 1976 modification of prospective cost-of-living increases in salary constituted a reduction in Salaries as that term is used in the Constitution.

A. The History of Article III, Section 4, Does Not Support Plaintiffs' Interpretation of Its Meaning.

Plaintiffs assert that article III, section 4, was expressly intended by the Legislature to prohibit revision of the prospective cost-of-living adjustments contained in section 68203. In support of their assertion plaintiffs submitted to the superior court materials which related to the background of the enactment of article III, section 4.

From these materials it appears that in 1971 the then Governor attempted to prevent the 1970 cost-of-living increase for judges from coming into effect by a line-item veto of a budget appropriation which covered the increase in judicial salaries. The Attorney General gave an opinion to the Controller which concluded that “Section 68203 does not, of itself, appropriate funds necessary to support the increase required by Section 68203 . . .,” that although judicial salaries remained payable at the new and higher rate, they could not be paid except to the extent funds for the payment of judicial salaries had been appropriated. Thus, if the Governor were to adhere to his position, judicial salaries would be paid at the increased rates, but the funds appropriated to pay such salaries would become exhausted before the close of the fiscal year. On an annualized basis the veto would become effective to prevent full compliance with section 68203. Push did not come to shove, however, and the potential future fiscal crisis was averted when the Governor withdrew his line-item veto. Thereafter, the chairman of the Constitutional Revision Commission personally drafted an amendment to the constitutional revision then under consideration in the Legislature, an amendment which added the second sentence to what is now section 4 of article III.

“Salaries of elected state officers may not be reduced during their term of office. Law that set these salaries are appropriations.” (Italics ours.)

This additional sentence remained in the final legislative version of the Constitution adopted by the electorate in November 1972.

From this incident plaintiffs argue that the proponents of article III, section 4, expressly intended to prevent modification of prospective salary adjustments under section 68203 that is, to forbid future legislative modification of the automatic cost-of-living formula then contained in that section, even for future years and for future salary levels. This speculation seems wide of the mark. Plainly the proponents and draftsmen of article III, section 4, meant to prevent a repetition of the line-item veto incident, a goal achieved by the second sentence of article III, section 4, which converts a salary law such as section 68203 into an appropriation and renders unnecessary a separate budget appropriation which a governor could veto. But it is one thing to view article III, section 4, as protective of salary increases that have become due and payable, and another to argue, as do plaintiffs, that it also prevents modification of all prospective salary adjustments. We find nothing in the legislative history of article III, section 4, and nothing in the 1971 veto incident to support that argument.

Nor can plaintiffs derive support for their interpretation of article III, section 4, from the ballot arguments presented to the voters at the time of the adoption of the constitutional revision in November 1972. The arguments in the ballot pamphlet submitted to the voters were not only devoid of any disclosure of intent and purpose to prevent modification of prospective judicial salary adjustments, but to the contrary they suggested the absence of any such purpose. Insofar as they related to article III, section 4, the ballot arguments stated:

“A provision would be added to prohibit any reduction in the salaries of elected state officers during their term of office and to provide that laws setting those salaries are appropriations. This would eliminate the existing requirement that there be a specific appropriation enacted in the Budget Act, or otherwise, To pay salaries.”1

“The various revisions and deletions of existing language in the State Constitution proposed by this amendment Will not result in any cost or revenue changes.”2

“Proposition 6 also protects elected State officers in all three branches of government by providing that their salaries can't be reduced during the term for which they were elected and makes salary statutes appropriations. This will not increase the cost of government or cost the taxpayers more, but will strengthen the independence of all three branches of government.”3 (Italics added.)

No reference was made to section 68203 or, indeed, to any aspect of the cost-of-living adjustment issue, other than the general statements that adoption of article III, section 4, “will not increase the cost of government or cost the taxpayers more” and “will not result in any cost or revenue changes.”

In short, the history of article III, section 4, indicates it was directed against a perceived evil attempts by veto of appropriations to prevent payment of increased judicial salaries after cost-of-living adjustments had gone into effect and become due and payable. The materials before the court suggest that those who drafted article III, section 4, those who voted to put it on the ballot, and those who voted in its favor, never considered or intended that adoption of article III, section 4, would freeze into the constitutional landscape the statutory experiment in judicial cost-of-living salary adjustments set out in section 68203.

B. Prospective Cost-of-Living Increases Are Not Salaries Within the Meaning of Article III, Section 4.

Plaintiffs' challenge to the 1976 amendment to section 68203 raises the question whether prospective cost-of-living increases that is, increases which have not yet gone into effect are Salaries within the meaning of article III, section 4 of the Constitution. Two settled principles of constitutional law are relevant. The first is the presumption of constitutionality to which all legislation is entitled. (See, e. g. California Housing Finance Agency v. Elliott (1976) 17 Cal.3d 575, 594, 131 Cal.Rptr. 361, 551 P.2d 1193.) The second is the canon that “where the Legislature has by statute adopted a reasonable construction of a constitutional provision its action has strong persuasive force and will ordinarily be followed.” (Woodcock v. Dick (1950) 36 Cal.2d 146, 148, 222 P.2d 667, 669, see also Lundberg v. County of Alameda (1956) 46 Cal.2d 644, 652, 298 P.2d 1; San Francisco v. Industrial Acc. Com. (1920) 183 Cal. 273, 279, 191 P. 26.) At bench, the Legislature's implicit construction in 1976 that the word Salary in article III, section 4, does not include prospective cost-of-living increases, was reasonably contemporaneous with its approval of article III, section 4, in 1972.

Section 68203, as it existed when article III, section 4, was drafted and adopted, provided that on September 1 of each year “the salary of each justice and judge named in Sections 68200 to 68202, inclusive, shall be increased” by an amount determined by multiplying the “then current salary” by the percentage increase in the California consumer price index. The use of the future tense “shall” and the reference to “then current salary” indicate that the Legislature did not view a prospective cost-of-living increase as part of a judge's Salary until that increase became due and was added to “then current salary” to become the salary payable for the next 12 months. Likewise, Salary is defined in the Judges' Retirement Law (Gov.Code, s 75003) as “the compensation Received by a judge as the emolument of the office of judge” (italics added). This definition obviously does not embrace compensation payable in the future after cost-of-living adjustments have been made; clearly, under section 75003 a judge's salary is the compensation he is currently being paid.

In Harrison v. Colgan [1905] 148 Cal. 69, 82 P. 674, the California Supreme Court, in a somewhat related context, refused to treat a prospective salary increase as included within the term Salary. That case involved a constitutional provision entitling justices of district courts of appeal to the same salaries as justices of the Supreme Court. In 1905 the Legislature raised the annual salaries of Supreme Court justices from $6,000 to $8,000. However, due to the then constitutional prohibition against increases in the salaries of judges during their term of office, no Supreme Court justice was eligible to claim the higher salary until 1907, when two justices would begin to serve new terms. Plaintiff, a justice of a district court of appeal, claimed that because he had been appointed after the effective date of the 1905 increase, he was entitled to the higher salary under the constitutional provision making the salaries of district court of appeal justices the same as those of Supreme Court justices. The Supreme Court rejected this claim stating:

“What, then, are the salaries of the justices of the Supreme Court to which those of the district Court justices must, for the present, conform? Clearly not the salaries which may Hereafter be payable under the amended statute when a new term of some of the justices of the Supreme Court shall have begun, but the present salaries now allowed and paid by them by law.” (Harrison v. Colgan (1905) 148 Cal. 69, at 72, 82 P. 674, at 675; italics added.)

In other words, even though Supreme Court justices might have a future right to an increase in compensation, until the increase became effective it could not be considered Salary within the meaning of the provision entitling district court of appeal justices to the same Salary as Supreme Court justices. The Salary of a Supreme Court justice was what he was then being paid. So here. The salary of an elected state officer is the amount he is presently being paid. For example, if in January 1976 the Legislature in its wisdom had passed a law making the salary of a court of appeal justice for the calendar year 1977 the same as that of a Supreme Court justice, and had then repealed the law in February 1976, thus returning future court of appeal salaries to their original amounts, under the reasoning of Harrison the prospective increase which never materialized could not be considered Salary, and no reduction in salary would have occurred by reason of the repeal. Although former section 68203 provided that judges would receive annual cost-of-living increases, those future increases did not become Salary within the meaning of article III, section 4, until they had become payable as current salary.

To conclude the point, salary is present pay, not future pay.

C. Elimination of a Prospective Increase in Salary Is Not a Reduction in Salary.

Although no California court has decided the precise issue, three New Jersey cases have rejected the argument that elimination of a prospective increase in salary constitutes a reduction in salary. (Greenway v. Board of Education (1943) 129 N.J.L. 461, 29 A.2d 890, 145 A.L.R. 404; Offhouse v. State Board of Education (1944) 131 N.J.L. 391, 36 A.2d 884; Kopera v. Board of Education (1960) 60 N.J.Super. 288, 158 A.2d 842, 846.) In Greenway, Supra, a New Jersey statute prohibited local school boards from reducing teachers' salaries. A local board's existing teachers' salary schedule, which provided future incremental salary increases for teachers, was repealed by the local board as an economy measure during the depression. A teacher contended that the repeal of the prospective increase by the local board constituted an impermissible reduction in salary contrary to the state statute. The New Jersey court disagreed, holding that increments do not become part of a teacher's salary until they accrue, and that until accrual their modification does not constitute a reduction in salary. (29 A.2d at p. 891.) In Offhouse, Supra, the court made the same point: “Only accrued increments under a valid and subsisting regulation of the local board are beyond repeal. Unaccrued increments do not take the classification of ‘salary’ within the intendment of (the statute).” (36 A.2d at p. 887.) And in Kopera, Supra, the court said: “The failure to receive an increase of salary does not constitute a reduction.” (158 A.2d at p. 846.)

Plaintiffs seek to distinguish these cases on the ground that they deal with a mere statutory prohibition against salary reductions and not with a constitutional prohibition. Such a suggestion misconceives the issue. The New Jersey statute, like the constitutional prohibition at issue here, prohibited salary reductions; the issue there, as here, was whether repeal by a subordinate body of prospective increases it had previously authorized constituted a reduction in Salary within the meaning of the statutory prohibition. The New Jersey courts held it did not, stating:

“Until the accrual, the modification or repeal of the rule providing for increments does not constitute a reduction of salary within the intendment of (the statute). A regulation providing for increments is a mere declaration of legislative policy that is at all times subject to abrogation by the local board in the public interest.” (Offhouse v. State Board of Education, Supra, 36 A.2d at p. 887.)

The New Jersey cases thus furnish valuable precedent for resolution of the issue at bench.

Apart from precedent, however, other fundamental considerations must be taken into account. The Constitution gives the Legislature ultimate responsibility for fixing judicial salaries (art. VI, s 19) and for fixing other governmental salaries as well. In 1964 the Legislature first experimented with a system for automatically adjusting judicial salaries to the cost-of-living. By 1976, however, that experiment, viewed from the legislative perspective of state salaries as a whole, had produced an imbalance as a result of a salary structure which provided full cost-of-living adjustments for only one group of officers of only one branch of government. Obviously, the Legislature might have responded to imbalance by raising all state salaries to meet the pressures of inflation. For reasons of political economy it chose not to do so. Such concerns are the responsibility of the legislative branch, whose task in salary setting is difficult, delicate, and troublesome. The complexity of its task counsels judicial caution in construing article III, section 4 of the Constitution so broadly that any experiment with a new mechanism for determining future salary increases becomes cast in constitutional stone.

A sound governmental structure requires that salaries for any one group of state officers be reasonably related to salaries for other state officers, to salaries for other state employees, and to salaries for comparable groups outside California. To accept plaintiffs' demand for an unrestrained application of section 68203 in its pre-amendment form would mandate judicial salaries on September 1, 1979, in the following rounded amounts:

Chief Justice $81,300 Supreme Court Justice 76,500 Court of Appeal Justice 71,700 Superior Court Judge 59,800 Municipal Court Judge 55,000

These salaries would presumptively exceed those of judges in any other judicial system in the United States, including the federal system (Chief Justice of the United States, $75,000; Supreme Court Justice, $72,000; Court of Appeals judge, $57,500; District Court judge, $54,500 (2 U.S.C.A. s 358)), make the California Supreme Court the nation's highest-paid court, the California court of appeal the third highest-paid court, and the California superior court the highest-paid trial court. (See, Survey of Judicial Salaries, vol. 5, no. 1, January 1979, National Center for State Courts, Williamsburg, Va.)

Plaintiffs' interpretation of article III, section 4, if accepted, would seriously cripple the power of the Legislature to take effective action in an important and sensitive area of its concern its fixing of judicial salaries pursuant to article VI, section 19, of the Constitution. Under plaintiffs' interpretation the Legislature would become a kind of sorcerer's apprentice able to turn on the money spigot but never able to shut it off. It is one thing to insist, as the Constitution does, that a present salary, once established, may not be reduced during a judge's term of office; it is another to argue that a legislative experiment to find a better mechanism for setting judicial salaries has been transmuted into an irreversible economic grant. Our constitutional tradition, exemplified by such decisions as Atkins v. United States (Ct.Cl.1977) 556 F.2d 1028, cert. denied (1978) 434 U.S. 1009, 98 S.Ct. 718, 54 L.Ed.2d 751, entrusts to the Legislature broad authority and responsibility over increases in judicial salaries. (Cal.Const., art. VI, s 19.) We reject plaintiffs' argument that article III, section 4 of the California Constitution precludes adjustment of future salary increases throughout a judge's term of office.

V

DOES THE AMENDMENT OF SECTION 68203 IMPAIR THE OBLIGATION OF CONTRACTS?

The remaining issue in the cause is whether the amendment to section 68203 impairs the obligation of contracts contrary to the state and federal constitutions and whether it infringes rights that have vested or accrued. Essentially, these various legal phraseologies (obligation of contracts, vested rights, accrued rights) reflect the same basic rule legal rights of persons may not be taken from them without appropriate compensation.

Since we are dealing with the rights of members of different groups who may be differently affected, the amendment may be valid for some and invalid for others. If such is the case, the question of severance of the valid from the invalid portions of the amendment will arise. Severance became a specific factor in the controversy when in 1977 the Attorney General gave his opinion to the defendant that section 68203 was unconstitutional as to sitting judges during their current term of office but constitutional as applied to judges serving subsequent terms of office and constitutional as applied to judicial pensioners. (60 Ops.Cal.Atty.Gen. 153.) To sort out the rights of the various plaintiffs, we discuss the contract-impairment, vested-accrued right issue as it concerns the different groups involved.

Judicial Pensioners. As noted earlier, the rights of judicial pensioners are directly tied to those of sitting judges and take the form of a floating pension proportionate to the comparable current judicial salary. We have heretofore concluded that, absent any reduction in the dollar amount of the pension, judicial pensioners' rights are dependent upon sitting judges' rights to salary, and, if a prospective increase in salary for sitting judges does not materialize, the pensioners have no independent grounds for complaint. Any contractual rights for future increases in judicial salary and any vested or accrued rights to future increases in judicial salary are not the rights of the pensioners. Consequently, any impairment or infringement of such rights only indirectly and secondarily affects judicial pensioners and gives them no separate cause to complain. (Cf. Harrison v. Colgan (1905) 148 Cal. 69, 73, 82 P. 674.) The pensioner floats in water whose origin is the current judicial office, and like water his rights cannot rise above their source.

Newly-Elected Judges. Nor do newly-elected or newly-appointed judges have cause to complain of prior legislative change in the future salary of the office to which the judge has been elected or appointed. Such judges did not serve under the old dispensation and could have no legitimate expectation of the continuance of cost-of-living increases in salary under the old law, in that the law had already been changed prior to their assumption of office.

Sitting Judges Whose Terms Continue. The difficult phase of this issue involves judges who held office during 1976 and whose terms continued beyond September 1, 1977. Both parties concede that such judges have no valid contractual claims or vested or accrued rights that would run beyond the duration of their term of office. However, since trial judges have terms of 6 years and appellate justices terms of 12 years, an existing term may last for as long as a decade. To recapitulate the situation of such judges, during 1976 they served until September 22 under the protection of a cost-of-living statute which promised them an increase in salary commensurate with the increase in the cost-of-living occurring during the year, the increase to take effect in the latter part of the following year. But on September 22 this protection against the increase in the cost-of-living that was occurring during 1976 was taken away by the amendment of section 68203. Did the adoption of this amendment impair any obligation of contracts or infringe any vested or accrued rights of judges in office in 1976 whose service and term of office continued beyond September 1, 1977?

Plaintiffs claim that the 1976 amendment is wholly invalid with respect to such judges, that for them automatic cost-of-living increases under the old law continue to the present date, and will continue throughout their term of office. In opposition, defendant argues that all such salary increases were prospective only; that no cost-of-living increase had been or could be determined on September 22, 1976, and, therefore, no right to salary increase could vest or accrue; that judges' rights to future salary are not determined under the law of contracts; that the legislative prerogative over judicial salaries authorized elimination of all prospective salary increases. In defendant's view the prospective increases were no more than an expectation, which, in the event, never materialized.

In evaluating these arguments, we consider the salary increase based on the cost-of-living increase that occurred during 1976 separately from any salary increases that would result under the old law from cost-of-living increases occurring during 1977 and thereafter.

A. Cost-of-Living Increase Occurring During 1976.

It is hornbook law that salaries of public officers are not governed by contract law but remain matters of public law governed by statute. (Miller v. Kister (1885) 68 Cal. 142, 144, 8 P. 813.) Yet it is also hornbook law that a public officer or public pensioner remains a beneficiary of the prohibition against impairment of the obligation of contracts, and, therefore, that a contract with a public officer or employer, once entered upon and vested or accrued, is as enforceable as any other contract and subject to impairment in violation of state and federal constitutions. (Kern v. City of Long Beach (1947) 29 Cal.2d 848, 851-53, 179 P.2d 799; Allen v. City of Long Beach (1955) 45 Cal.2d 128, 131, 287 P.2d 765; Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 246, 248, 74 Cal.Rptr. 398, 449 P.2d 462.) While these principles are well-known and easy to understand, their application to particular factual situations is often most difficult. When does a right vest? When does an obligation accrue? When does a promised benefit become a contractual obligation? A rational response to these questions requires some consideration of the fundamentals of contract law.

A basic difference between the parties is their divergent view of the nature of contract, which in turn produces their divergent view of the constitutional prohibition against impairment of the obligation of contracts. Plaintiffs take a substantive view of contract as conduct of the parties that creates vested rights, which once vested are no longer subject to change. Defendant takes a purely formal view of contract as an agreement in documentary form, negotiated between the parties, reduced to writing, and signed by the parties or their representatives. Under defendant's view of contract, form controls substance, and only transactions cast in treaty form become contracts entitled to constitutional protection against impairment. Imbedded in defendant's formal view of contract lies the ancient doctrine of sovereign immunity, which makes the state, as successor to the sovereign, immune from suit by its subjects. By reason of this immunity all promises of the state, including those embodied in the terms and conditions of public employment, are legally unenforceable, except to the extent the state as a matter of grace allows itself to be sued on its own terms and conditions. According to defendant, the state has only agreed to be bound by formally negotiated employment contracts, and it follows, therefore, that public employment entered upon by other means enjoys no protection against impairment of the obligation of contracts.

We think neither of these views is wholly satisfactory and that both miss the current relationship of contract to sovereign immunity. The essence of contract is a promise for whose breach the law provides a remedy (Restat. Contracts, P 1), and the essence of contract law is the determination of what promises are binding (1 Williston on Contracts (3d ed. 1957) s 1). While in the past the state could break its contractual promises with impunity, today this is no longer generally true in that the sovereign immunity which allowed such conduct has entered upon a stage of terminal illness, and its decline in vitality has led to a similar decline in contract theories structured upon it. The time has long passed when, as in Dodge v. Board of Education (1937) 302 U.S. 74, 78, 58 S.Ct. 98, 82 L.Ed. 57, a court could describe the pension of a public employee as a gratuity involving no agreement of the parties and subject to modification and abolition at the pleasure of the legislature. In this state sovereign immunity currently plays a minimal role in contract, in tort, and in public employment alike. (Cal.Const., art. III, s 5; Gov.Code, ss 815 ff.; Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 74 Cal.Rptr. 398, 449 P.2d 462; Hall v. University of Nevada (1972) 8 Cal.3d 522, 526, 105 Cal.Rptr. 355, 503 P.2d 1363.) We do not accept defendant's restrictive view that a public entity's obligation of contract is limited to enforcement of formal, written employment agreements executed by the parties in treaty form. (Cf. Youngman v. Nevada Irrigation Dist., supra, 70 Cal.2d at pp. 246, 248, 74 Cal.Rptr. 398, 449 P.2d 462.) We see no essential difference between a promise made by a public entity in negotiations with its employees under collective bargaining and thereafter ratified by public legislation in the form of statute, ordinance, or resolution, and a similar promise by a public entity made directly to its employees in the form of public legislation. In both instances the contracts become enforceable through performance by the promisees of the terms and conditions set out in the legislative promise.

The question at bench, therefore, is not the presence or absence of formal contract, but the extent to which the legislative promise of annual cost-of-living increases in judicial salaries has become binding. How much part performance by a state officer or employee makes the state's promise enforceable? The issue, sometimes expressed under the rubric of promissory estoppel, consideration, or action in reliance on a promise, may also be posed as a question of the vesting or accruing of rights. On this key question of substantial part performance the parties remain poles apart. Plaintiffs maintain that one day's service as a judge entitles the judge to full cost-of-living protection throughout his entire term of office of 6 or 12 years. Defendant maintains that a judge, apart from his protection against an absolute reduction in dollar amount of salary, is only entitled to salary in the amount currently fixed by the Legislature and for the period of time he has already performed services. In defendant's view a judge who had performed services for 364 days from January 1 to December 30 on the promise of a cost-of-living increase starting January 1 would be unprotected against legislative repeal on December 31 of the promised cost-of-living increase.

At bench, judges who served during the year 1976 from January 1 to September 22 rendered services under a statute which promised them protection against increases in the cost-of-living occurring during the period of their service. During each month and each quarter of the year 1976 the cost-of-living increased.4 But after these judges had served for approximately three-quarters of the year, they were put on notice on September 22 that the Legislature had terminated this protection, a termination in effect made retroactive to January 1. The issue is whether the judges' right to protection against increases in the cost-of-living occurring during 1976 become by reason of substantial part performance a vested or accrued right which the Legislature could not constitutionally take away. Did this legislative promise create reasonable expectations on which the judges could properly rely? (1 Corbin on Contracts (1963), s 1.) Broken promises and repudiation of reasonable expectations are, of course, as old as mankind's history itself, and we recall the biblical story of Jacob, who worked seven years for Laban under the promise he would be given the beautiful daughter Rachel but instead was fobbed off with the plain daughter Leah. While wives are no longer bought and sold, promises continue to be made and broken, and the problems involved in their enforcement have not greatly changed. In the Laban version of bait-and-switch, we have little difficulty recognizing a contractual obligation amounting to vested right, binding by reason of full performance. The difficulty comes with substantial part performance. Would six years work by Jacob have created a similar vested right? Five years? Three years? One year?

Three recent analogous cases are instructive: Sonoma County Organization of Public Employees v. County of Sonoma (1979) 23 Cal.3d 296, 152 Cal.Rptr. 903, 591 P.2d 1; Betts v. Board of Administration (1978) 21 Cal.3d 859, 148 Cal.Rptr. 158, 582 P.2d 614, and California League of City Employee Associations v. Palos Verdes Library Dist. (1978) 87 Cal.App.3d 135, 150 Cal.Rptr. 739. The latest of these, Sonoma, supra, held that Legislature in June 1978 could not by statutory enactment annul memorandums of understanding (agreements) made by local governments with representatives of their employees in 1977 and thereafter ratified by resolution or ordinance, which provided for cost-of-living wage increases to take effect in July 1978 for the fiscal year 1978-79. Such legislation, said the court, impaired the obligation of contracts. The court noted that impairment of the obligation of contracts is not an absolute proscription which can be read with literal exactness, but one dependent on the circumstances surrounding the impairment. After reviewing the circumstances of the legislative enactment, the court declared that the severity of the emergency was insufficient to justify the substantial impairment which was involved, that the impact of the legislation on employees' contract rights was severe, that the wage increases would irretrievably be lost, and that “Undoubtedly many employees rendered their services in the first year in anticipation of their contractual right to the second year increase.” (23 Cal.3d p. 313, 152 Cal.Rptr. p. 912, 591 P.2d p. 10; italics ours.) A unanimous court concluded that the legislative enactment which purported to invalidate agreements with public employees for cost-of-living wage increases in the coming year was invalid as an impairment of the obligation of contracts in violation of both state and federal constitutions.5

The second analogous case, Betts v. Board of Administration, supra (1978) 21 Cal.3d 859, 148 Cal.Rptr. 158, 582 P.2d 614, held that a former state treasurer, who had served in office for eight years from 1959 to 1967, was entitled to a pension on the basis of the law in effect at the time of his termination of state service in 1967 rather than that in effect at the time of his application for a pension in 1976. In 1959 the legislative pension plan was tied to the current salary for the office, thereby providing a floating pension for its beneficiaries. In 1963 an annual automatic cost-of-living increase was added to the legislative pension plan. In 1974 the state changed its legislative pension plan from a floating pension to a fixed pension with the amount of pension tied to the highest salary received by the applicant during his period of service. Nevertheless, said the court, Betts was entitled to a pension on the old basis, i. e., a floating pension tied to the current salary of the office plus an automatic cost-of-living adjustment, even though he had not applied for the pension until 1976 and even though his benefits would be superior to those of currently retiring legislators, in that he would receive both a pension based on the current salary of his office and full automatic cost-of-living increases. The court found a “vested contractual right to pension benefits” (p. 863, 148 Cal.Rptr. p. 161, 582 P.2d p. 617), which accrued on acceptance of employment and which the state could not later modify to his disadvantage. Betts' “contractual pension expectations are measured by benefits which are in effect not only when employment commences, but which are thereafter conferred during the employee's subsequent tenure.” (p. 866, 148 Cal.Rptr. p. 163, 582 P.2d p. 619.) These “form the (bases) by which . . . reasonable pension expectations must be measured. For four years, (Betts) provided his services under a statutory scheme which Simultaneously included both computation methods.” (p. 867, 148 Cal.Rptr. p. 163, 582 P.2d p. 619.) Betts, while in office, had a Contractual expectation that he was providing services under a particular statutory pension plan and by so doing he earned a vested contractual right to those pension benefits.

In the third case, California League of City Employee Associations v. Palos Verdes Library Dist. (1978) 87 Cal.App.3d 135, 150 Cal.Rptr. 739, public employees sought reinstatement of certain fringe benefits which their employer, Palos Verdes Library District, had adopted in 1966 and then purportedly eliminated by resolution in 1975. These benefits provided longevity salary increases based on years of service, increased vacation time for librarians after 10 years service, and a sabbatical leave with pay for librarians at the end of 6 years service. The court, in compelling reinstatement of the benefits, declared that the benefits were a form of compensation protected by the contract clause of the constitution. The specific benefits were individually referred to as “maturing emoluments,” “deferred compensation,” “promised future compensation,” “promised benefits,” and “expected compensation,” and were then collectively described as “fundamental vested rights.” Protection of the rights of public employees is not limited to pension rights, said the court, but extends to other terms and conditions of employment, such as annual wage increases. The benefits were an inducement to employees to remain in public employment, said the court, and thus became a form of earned compensation. The court hypothesized the situation of a librarian who had worked five and one-half years toward a sabbatical at the end of 6 years service and a librarian who had worked 9 years in expectation of a longer vacation at the end of 10 years service. Elimination of these promised benefits, said the court, would be grossly unfair to those employees and would allow the library district to reap the rewards of long-time service without paying an important part of the promised compensation.

Defendant seeks to distinguish Sonoma County Organization of Public Employees v. County of Sonoma, supra (1979) 23 Cal.3d 296, 152 Cal.Rptr. 903, 591 P.2d 1, and California League of City Employee Associations v. Palos Verdes Library Dist., supra (1978) 87 Cal.App.3d 135, 150 Cal.Rptr. 739, as instances in which contracts with public entities became enforceable because they were preceded by formal collective bargaining agreements. Even in this respect his argument does not hold up, for in Palos Verdes, supra, no formal agreement had been made between the parties. But in any event the Supreme Court has squarely ruled in an earlier case that no formal employment contract is necessary to assure public employees protection against breach of contract by their public employer. (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 246, 248, 74 Cal.Rptr. 398, 449 P.2d 462.) We think the collective bargaining-agreement limitation that defendant seeks to impose on obligation of contracts is inherently unsound and untenable. It would be inconceivable, for example, with respect to claims of two teachers who were employed by different school boards, one represented by collective bargaining and the other not, both of whom had rendered services for 6 years under a board ordinance or resolution promising a paid sabbatical vacation at the end of 7 years, that a court would hold that one teacher was protected against the loss of the sabbatical and the other was not.

The substantial part performance of the public employees in Sonoma, the former treasurer in Betts, and of the librarians in Palos Verdes, is comparable, proportionately, to that of the judges who performed services for three-quarters of the year 1976 under a statutory promise of protection against current increases in the cost-of-living. The public employees in Sonoma had worked a full year in expectation of the cost-of-living increase scheduled to take effect in the second year. The former treasurer in Betts, had worked four years out of eight under the terms of the most favorable pension plan. Although we do not know the exact periods of service of the librarians in Palos Verdes, the court suggested instances of five and one-half years service out of 6 and of 9 years service out of 10. Performance in the present case involving as it does three-quarters of a year, falls within the range of these other cases. While it is impossible to be precise in fixing the point at which reasonable expectation turns into vested right by reason of substantial part performance (1A Corbin on Contracts (1963) s 200, p. 216), these cases suggest that performance of 50 percent or more of the services necessary to accrue promised benefits is sufficient to cause the benefits to become vested. If we adopt this standard, performance for 9 months out of 12 amounts to sufficient substantial part performance to qualify for promised benefits. But, defendant argues, the cost-of-living increase for 1976 could not have vested before the end of the year, because until then it could not be known whether the cost-of-living would in fact increase during the year, or what the amount of the increase, if any, would be. This is true enough as to the exact amount of the increase, and perhaps defendant's argument would carry persuasiveness if no reasonable inference of a cost-of-living increase during 1976 could have been drawn before the end of the year. However, by September 22 it was probable beyond any reasonable doubt that the cost-of-living for the year 1976 would go up, in that it had done so in each month and each quarter of the year. As in other areas of the law, we do not demand absolute certainty but are content to accept reasonable probabilities. Inflation in 1976 was a fact of life, and the promise of protection against it was a promise of protection against a real and not a hypothetical loss. We think the promised protection vested, even before its exact amount became known.

We conclude, therefore, that substantial part performance rendered by the judges during the first three-quarters of 1976 under a promise of protection against the current cost-of-living increase was sufficient to make the promise enforceable. The legislative amendment on September 22 came too late in the year to annul rights that had already accrued.

B. Cost-of-Living Increases Occurring During 1977 and Thereafter.

Our view that salary increases tied to cost-of-living increases occurring during 1976 had vested for sitting judges does not necessarily carry with it the conclusion that further salary increases would vest for those judges by reason of cost-of-living increases occurring during 1977 and thereafter. For those future periods the factors connected with legislative revocation of the promised protection against future inflation differed in several important respects from those relevant to inflation occurring during 1976.

(1) On September 22, 1976, it could not be known whether increases in the cost-of-living would take place in 1977 and in subsequent years.

(2) On that date, a sitting judge had performed no contemporaneous services in reliance on the promise of protection against cost-of-living increases that might occur during 1977.

(3) The Legislature had given adequate advance notice that future cost-of-living increases in judicial salaries would be limited, and that full protection against future inflation was a thing of the past. (As discussed earlier, removal of future protection against future inflation is not a reduction in salary in violation of article III, section 4, of the California Constitution.)

(4) On September 22, 1976, a sitting judge could chart his course for the coming year: he could either continue to render services and take his chances with future inflation and with future legislative willingness to adjust salaries to increases in the cost-of-living as and when they occurred; or, if dissatisfied with these prospects and apprehensive about the loss of full protection against future inflation, he could resume the practice of law or enter upon other employment. He remained free to choose.

By reason of these differences, the substantial part performance in 1976 induced by a promise in existence during 1976 and reasonably relied upon, did not take place in 1977. With respect to 1977 and thereafter, the legislative revocation of its promise was sufficiently timely to permit modification, alteration, or abolition of the statutory promise of protection against future increases in the cost-of-living. Once freed from the restraint of substantial part performance, the legislative promise of full protection against future inflation became a mere expression of the then legislative intention to deal with future contingencies in a particular fashion, an expression which was not binding on future legislatures. In the absence of vested rights, legislative authority to fix judicial salaries (Cal.Const., art. VI, s 19) may not be forestalled by the actions of an earlier legislature. As the New Jersey court said in Greenway v. Board of Education (1943) 129 N.J.L. 461, 29 A.2d 890, 891, 145 A.L.R. 404, the promise of future salary increases is not a continuing contract of indefinite duration and is not a conclusive and irrepealable legislative act. In short, the promise creates a hope but not a right. Hence, judges are not entitled to protection against future increases in the cost-of-living that may take place during their term of office merely because the promise of future protection was in effect at the time they took office. With respect to increases in the cost-of-living that occurred during 1977 and thereafter, sitting judges enjoyed only the limited protection against inflation given them by the amended version of section 68203.

C. The 1970 Amendment Is Severable in Time But Not as to Persons.

Severability in Time. We have concluded that the 1976 amendment to section 68203 is valid with respect to future salary increases based on future cost-of-living increases occurring in 1977 and thereafter, but invalid as applied to sitting judges with respect to salary increases based on the cost-of-living increase that took place in 1976. In such circumstances the law ordinarily remains in abeyance until such time as it can become constitutionally effective. (Busch v. Turner (1945) 26 Cal.2d 817, 820, 161 P.2d 456; Regan v. County of San Mateo (1939) 14 Cal.2d 713, 97 P.2d 231; Galeener v. Honeycutt (1916) 173 Cal. 100, 159 P. 595; Smith v. Mathews (1909) 155 Cal. 752, 103 P. 199; Harrison v. Colgan (1905) 148 Cal. 69, 82 P. 674.)

Hence, judges in office during 1976 are entitled to the amount of salary that became payable to them on September 1, 1977 under the old law and are entitled to receive that same salary until its amount has been exceeded by the provisions of the new law. But these judges may not secure the benefits of both the old and the new law by selectively adopting favorable features from each. Accordingly, the judges' salary increase under the old law of 5.427 percent on September 1, 1977 anticipated the five percent increase scheduled for July 1, 1978 under the new law, and judges are not entitled to the benefit of both increases. Consequently, judicial salaries remain at their September 1, 1977 level until July 1, 1979, at which time judges' salaries calculated solely on the basis of the new law (Gov.Code, ss 68200-203) will exceed the September 1, 1977 level, the cost-of-living increase for 1976 will have been fully absorbed, and the new law will have wholly superseded the old.

Severability as to Persons. The final issue involves the status of judges who did not sit during the year 1976 and therefore did not render services under any expectation of protection against increases in the cost-of-living. Plaintiffs argue the unfairness and inequity that would result from salary differentials among judges who are performing similar duties. Defendant argues that since the Legislature must have intended to put the new law into effect to the fullest possible extent, newly-elected or appointed judges should be paid salaries under the new law without regard to the larger salaries that may have accrued to judges serving at the time of the new law's adoption. Defendant urges that if application of a statute to some persons will render it invalid, a court should presume the Legislature intended to exclude those persons from its application but to apply it to all others. That an incumbent may be entitled to additional salary as a matter of accrued right, asserts defendant, in no way requires abatement of the law in its operation on newly-elected or appointed judges or judges entering upon a new term of office.

It is clear that the Legislature, if it wishes, may create different salary levels for officers or employees who are performing similar duties. The state pay schedule with its system of grades and steps is a current example of such differentiation (Gov.Code, ss 18850 ff.) and instances abound in California history of superior court judges and appellate justices performing similar duties at different rates of salary. (See Sevier v. Riley (1926) 198 Cal. 170, 244 P. 323; Harrison v. Colgan (1905) 148 Cal. 69, 82 P. 674; Crawford v. Payne (1936) 12 Cal.App.2d 485, 55 P.2d 1240.) But while it is clear that the Legislature has the power to mandate differing judicial salary levels, the question is whether it so intended and acted in this instance. Nothing brought to our attention suggests that when the Legislature amended section 68203, it intended to authorize the contrived arrangement of different classes of judges serving at different rates of salary. The awkwardness of such arrangements needs no elaboration. We think it more logical to construe the amendment as deferred in its application to all judges until such time as it can universally and uniformly apply to all judges, i. e. as held in abeyance until vested rights have been satisfied. Consequently, we are of opinion that all judges and judicial pensioners are equally and uniformly affected by the amendment and all are entitled to salaries and pensions calculated on the basis of the salaries payable to sitting judges who served in 1976.

VI

CONCLUSION

1. The 1976 amendment to Government Code section 68203 is valid, except to the extent it purported to eliminate salary increases for sitting judges based on the increased cost-of-living during 1976 and scheduled to take effect September 1, 1977.

2. The Legislature did not intend to create differing salary scales for judges of differing tenures. The 1976 amendment, therefore, is invalid for all judges to the extent it purported to eliminate the September 1, 1977 salary increase based on the cost-of-living increase that occurred in 1976.

3. The 1976 amendment eliminated all other increases in judicial salary calculated under the old law.

4. All judges are entitled to a 5.427 percent increase in salary for the ten-month period September 1, 1977 to June 30, 1978, and to an 0.427 percent increase in salary for the period July 1, 1978 to June 30, 1979.

5. Calculation of judicial salaries under the new law starts with amounts itemized in Government Code sections 68200, 68201, and 68202, increased by five percent on July 1, 1978, and by five percent of the increased amount on July 1, 1979.

6. Commencing July 1, 1979, judicial salaries will be calculated solely on the basis of amended sections 68200 to 68203, and former section 68203 will become obsolete.

7. The pensions of judicial pensioners are tied to current judicial salaries. Pensioners are entitled to proportionate increases in the amount of their pensions in the same proportions and for same periods of time as active judges.

The judgment is reversed. Each side will bear its own costs.

FOOTNOTES

1.  Excerpt from the ballot pamphlet entitled, “Detailed Analysis by the Legislative Counsel.”

2.  Excerpt from the ballot pamphlet entitled, “Cost Analysis by the Legislative Analyst.”

3.  Excerpt from “Argument in Favor of Proposition 6,” signed by Judge Bruce W. Sumner, Chairman of the Constitution Revision Commission, Senator Nicholas C. Petris, and Assemblyman Robert G. Beverly.

4.  U.S. Dept. of Labor, “Current Labor Statistics: Consumer Price Index,” (March 1977) Vol. 100, No. 3, Monthly Labor Review 109; Cal. Dept. of Ind.Rel., Cal. Consumer Price Index, 1976 (July 31, 1978).

5.  Some three-year contracts were involved in Sonoma, but the court's opinion discussed the legal issues in terms of two-year contracts and one-year's impairment.

FLEMING, Associate Justice.

ROTH, P. J., and BEACH, J., concur.