Archive for the ‘Reforms’ Category

Reed pension reform stalls, 401(k) favored in poll

January 31, 2014

San Jose Mayor Chuck Reed said yesterday the backers of a public pension reform initiative will file a lawsuit to correct an “inaccurate and misleading” ballot summary, making a vote on the measure in November doubtful.

Reed said court action to change the summary from Attorney General Kamala Harris, which appears to contain language “lifted” from a labor poll, is unlikely to leave enough time to gather the signatures needed to put the initiative on the ballot.

“If we don’t hit ’14, we will be pushing ahead for ’16,” Reed said, referring to moving the target from this fall until the next regularly scheduled statewide elections two years from now.

Major campaign donations would be needed to finance a drive to get the 807,615 voter signatures needed to place a state constitutional amendment on the ballot and then battle well-funded opposition from public employee unions.

Two years ago, Dan Pellissier said California Pension Reform suspended an initiative drive “after determining the attorney general’s false and misleading title and summary makes it nearly impossible to pass.”

Reed said the first sentence of Harris’s summary incorrectly says his initiative “eliminates” government worker vested rights, a portrayal found by a labor polling firm to foster “a visceral negative response,” the Sacramento Bee reported last month.

The first sentence also “singles out a few specific public occupations that are held in high regard by voters,” Reed said, which was one of Pellissier’s complaints about the summary of his initiative.

Here’s the sentence in question: “Eliminates constitutional protections for vested pension and retiree healthcare benefits for current public employees, including teachers, nurses, and peace officers, for future work performed.”

Harris

Harris

Reed said he has not polled on the summary. A public employee union coalition, Californians for Retirement Security, said last week their polling found seven of 10 voters do not favor “eliminating” benefits for several different groups of workers.

“More important than rejecting the language of this ballot proposal, California voters reject the idea of reducing or eliminating retirement benefits for current public employees,” said the Garin-Hart-Yang poll.

The initiative would give state and local governments the option, like private-sector pensions, of cutting retirement benefits current workers earn in the future, while preserving benefits already earned through past service.

A little-publicized part of the initiative is intended to strengthen retirement benefits by requiring governments to propose, but not enact, annual plans for fully funding pensions and retiree health care in an unusually short 15 years.

In contrast to the union poll finding that seven of 10 voters do not favor Reed’s initiative, a poll issued this week by the non-partisan Public Policy Institute of California found that seven of 10 voters favor ending pensions for new government employees.

“Overwhelming majorities (82 percent adults, 85 percent likely voters) say the amount of money spent on public employee pension or retirement systems is at least somewhat of a problem for state and local government budgets,” a PPIC news release said.

“One idea to deal with the situation is to change the pension system for new employees from defined benefits to a defined contribution system similar to a 401(k) plan. Asked about this idea, 71 percent of adults and 73 percent of likely voters support it, with strong majorities across parties in favor.”

Past PPIC polls also have found strong support for switching government employees to 401(k)-style individual investment plans that have replaced pensions in most of the private sector.

Reed

Reed


Reed, responding to a question, said he did not poll in advance of designing the initiative or consider using a “selling point,” a popular and easy-to-explain provision that might aid passage of the complicated main part of the initiative.

Instead, Reed said talks with other mayors settled on three principles. The initiative should 1) come from Democrats like Reed 2) be a solution other mayors can support 3) be optional, not a requirement.

“We think we have a plan that works, that solves the problem,” Reed said. “There are no gimmicks. It’s just a straightforward initiative.”

State court decisions dating back to 1955, erroneous in the view of some, mean the pension promised a worker on the date of hire becomes a “vested right,” protected by contract law, that cannot be cut unless offset by a new benefit of comparable value.

Reed and others, including the bipartisan Little Hoover Commission, argue that if growing retirement costs are taking money needed for basic programs and services, cutting pensions current workers in the future is needed to quickly get significant savings.

Bargaining with unions, and pension reform legislation that took effect last year, can increase employee pension contributions and give new hires lower pensions, but the initial savings are small and bigger savings takes decades.

A pension reform pushed through the Legislature by Gov. Brown, AB 340 in 2012, did not put much of a dent in the huge debt or “unfunded liability” of the California Public Employees Retirement System or California State Teachers Retirement System.

In San Jose and San Diego, where retirement costs were taking 20 percent or more of city general funds, voters in June 2012 overwhelmingly approved measures (70 and 66 percent) that, in different ways, attempt to cut pensions current workers earn in the future.

The San Diego measure switched all new hires, except police, to a 401(k)-style plan and called for a five-year freeze on the pay used to calculate pensions, while still allowing pay raises.

In Ventura County, where a 1997 court decision allowed what critics say is pension “spiking” in 20 county systems, a group filed a proposed initiative this month similar to the San Diego 401(k)-style measure, except sheriff’s officers are included.

Reed’s San Jose measure gave current workers an option: 1) Increased pension contributions of up to 16 percent of pay, but no more than half the cost of paying for the unfunded liability. 2) A much lower pension for future service.

Orange County has been waiting since 2009 for an IRS ruling on a cost-cutting plan negotiated with a union that gives workers the option of choosing a lower pension rather than paying a higher pension contribution.

Reed, working with several national groups, said he met with IRS officials about 10 days ago to discuss getting formal IRS approval for current workers to choose a lower pension.

After a five-day trial last July, a superior court judge last month upheld much of the San Jose measure but overturned the option for current workers. The city and the unions are scheduled to give the judge their comments on the ruling today.

Reed said he expects appeals to take the case to the state Supreme Court in several years, giving the high court a chance to review some of the old decisions on the pension rights of current workers.

“They will have a chance to clarify or change, if they think it needs to be done,” he said.

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 31 Jan 14


Follow

Get every new post delivered to your Inbox.

Join 255 other followers

%d bloggers like this: