Backers of a Ventura County pension reform initiative, which was removed from the November ballot by a judge last week, are not appealing the ruling. But they may meet with other reformers after the elections this fall to discuss a statewide pension reform initiative.
The Ventura reformers, including Supervisor Peter Foy, are talking about meeting with the leaders of pension reform measures in San Diego and San Jose approved by voters two years ago — former San Diego city councilman Carl DeMaio and San Jose Mayor Chuck Reed.
“I think we are going to get some large donors if we can all agree on something that’s workable,” said David Grau, chairman of the Ventura County Taxpayers Association and a leader of the county initiative drive.
The local pension reformers from all three areas share one common goal: cut growing pension costs that eat up funds needed for basic government services. But the methods they chose to cut pension costs are very different.
The Ventura County initiative, similar to the San Diego initiative, would have given new hires a 401(k)-style investment plan instead of a pension (the San Diego initiative exempted police) and called for a five-year freeze on pay used to calculate pensions.
The San Jose measure, while protecting pension amounts already earned, gives current workers and new hires a choice for pensions earned in the future: pay much more to earn the old pension amounts or receive a lower pension.
Instead of eventually eliminating pensions like the Ventura County plan, the statewide initiative Reed dropped last January, complaining of a misleading ballot summary, is intended to strengthen pension funding and could even increase-short term costs.
In addition to the pension choice, a little-publicized provision in the Reed initiative would require governments to propose, but not enact, annual plans for fully funding pensions and retiree health care in an unusually short 15 years.
Grau said the Ventura group had not yet talked to Reed, who has said he will continue pushing his initiative for 2016. DeMaio is interested in a statewide pension initiative, Grau said, but he is running for Congress and may not want to meet until after the November election.
Reformers think a cost-cutting pension reform Gov. Brown pushed through the Legislature two years ago falls short of what is needed. New hires get lower pensions and, among other things, some employees will pay a little more for their pensions.
The Legislature rejected one of the governor’s key proposals: a “hybrid” plan for new hires that combines a smaller pension with a 401(k)-style individual investment plan, similar to the retirement plan adopted for federal employees in 1986.
Could local pension reformers find common ground on some version of a hybrid plan? An incentive for the local reformers would be the possible support of a re-elected Brown, who has a big lead in the polls, if he were to renew his interest in pension reform.
If voters had approved the Ventura County initiative, some expected a domino-like spread of similar ballot measures to the 19 other counties with retirement systems operating under a 1937 act.
But Ventura Superior Court Judge Kent Kellegrew ruled there is nothing in the 1937 act that allows “an individual county to ‘opt out’ or terminate its participation” through a countywide initiative or a vote of the county supervisors.
The judge agreed with a union lawsuit backed by a legal opinion from the Ventura County counsel, endorsed by a 4-to-1 vote of county supervisors, Foy opposing. The change apparently can be made only by the Legislature or a statewide ballot measure.
Grau said the initiative backers were surprised by the judge’s swift decision. They had a legal opinion saying the initiative was legal and an actuarial report saying there would be no transition costs, backed by a separate actuarial report done for the county.
Among several things influencing the decision of initiative backers not to appeal, Grau said, was being told they could be liable for the opposition’s legal costs if they lost a quick appeal.
The judge said in his ruling that “allowing this measure to be considered on the November ballot would only result in a waste of public resources.” If voters approved, he said, the measure could not be implemented.
A vote for the initiative might have been used as an argument for legislation allowing Ventura County to make the change. But the initiative backers do not plan to seek legislation, assuming like many that union opposition makes that a non-starter.
Former Gov. Arnold Schwarzenegger found that union political clout goes beyond Democrats. After a record 100-day budget holdout in 2010, he got legislation requiring most state workers to pay more for their pensions.
In his weekly radio address, Schwarzenegger said minority Republicans refused to support the required two-thirds vote for the bill. He said Republicans “sold out” to the prison guard union for campaign contributions, naming several legislators.
Schwarzenegger said the Republican blockade was lifted by getting the signature of Secretary of State Debra Bowen at 3 a.m. at her home, clearing the way for a special legislative session and passage of the bill by Democrats on a majority vote.
One of the statewide initiative issues facing local pension reformers, in addition to finding a consensus plan and funding, is the view that the courts have said the pensions of current workers are a “vested right” that cannot be cut, unless offset by a new benefit.
The watchdog Little Hoover Commission and others think the key to quickly making major cuts in pension costs, and easing the strain on government budgets, is cutting the pensions current workers earn in the future.
As the Legislature worked on Brown’s pension reform two years ago, the mayors of eight of the state’s 11 largest cities sent legislative leaders a letter urging that cities be given “clear authority to modify future pension accruals,” a plea that was rejected.
Last December the provision in the San Jose measure giving current workers the pension choice, pay more or receive less, was ruled a violation of vested rights and overturned by a superior court judge, despite a city charter specifically allowing pension changes and repeals.
While awaiting an appeal, San Jose also awaits an IRS decision on whether choosing a lower benefit prevents tax-deferred status for plans. Orange County, which negotiated a similar pension option with employees, has been waiting for an IRS decision on the issue since 2009.
The San Diego and Ventura County measures avoid vested-rights challenges by switching new hires, but not current workers, to 401(k)-style plans. The plans are now widely used in the private sector, shifting investment risk from the employer to the employee.
Similar to previous polls, a statewide survey issued by the nonpartisan Public Policy Institute of California last January found that switching new government hires to 401(k)-style plans is supported by 73 percent of likely voters.
Critics say a 401(k)-style plan would harm recruitment and retention of employees (the reason San Diego exempted police) and often is uncertain and inadequate, particularly if investments are hit by a stock market crash shortly before retirement.
But even limiting pension cuts to new hires is not a legal sure thing. The San Diego and San Jose measures are being challenged by the state Public Employment Relations Board because they were not bargained with labor unions.
A cost-cutting Los Angeles pension reform was overturned two weeks ago by a Los Angeles labor board. A hearing officer concluded that at the moment of hire, new employees become members of the bargaining unit and therefore get the same benefits.
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com. Posted 11 Aug 14