Pension initiative faces two tests: funding, courts

A pension reform group that filed two versions of an initiative yesterday faces two tests: raising $3 million to place the proposal on the November ballot next year, and a court battle over making current workers pay more for their pensions if the measure passes.

As public pension costs have risen while government services are being cut in a weak economy, the reform group has filed initiatives in the past, which failed to attract funding even though some polls have shown 70 percent support for pension reform.

This time the group, now led by Dan Pellissier, raised $250,000 for polling and legal experts before filing initiatives designed to withstand court challenges and quickly cut government pension costs, particularly important for some struggling cities.

He said the next step is to raise about $3 million, enough to pay for a drive to gather 1.3 million voter signatures and provide a cushion well above the minimum needed to place a state constitutional amendment on the ballot.

“Not today,” Pellissier said, when asked at a news conference if the group had the money. “But we have some commitments for future funding, and we have what we think is a good path in order to raise that amount of money.”

He said George Shultz, a former U.S. secretary of state in the Reagan administration, is a part of the campaign team and “has a tremendous amount of influence with major donors.”

In addition, Mike Genest, a finance director for former Republican Gov. Arnold Schwarzenegger, said he was “happy to be part of what’s become a pretty large coalition of people who have been trying for quite some time to make some progress on this issue.”

Aaron McLear, Schwarzenegger’s former press secretary, told the news conference fundraising should be aided by having agreement among reformers, who have not always been “on the same page,” and a firm proposal to show potential donors.

But some separation quickly emerged when Marcia Fritz, president of the California Foundation for Fiscal Responsibility, told the Sacramento Bee she was “not a part of this,” even though she was mentioned at the news conference.

The California Pension Reform group led by Pellissier is a spin-off from the foundation founded by the late former Assemblyman Keith Richman, R-Northridge. Pellissier, a former Richman aide, said the initiative is a Richman “legacy.”

A Fritz article in the Los Angeles Times yesterday urged legislators to find “common ground” for taxpayers and public employees “within the framework” of a pension reform proposed by Gov. Brown, some parts requiring voter approval.

Pellissier and Genest said the governor’s plan needs to be “more aggressive.” They were skeptical that Democratic legislative legislators and their union allies will agree to the governor’s plan, much less add more cuts in employer costs.

“It is possible, very unlikely, that the Legislature could pass something that would be strong enough to have our team decide that we would not move ahead with our proposal,” said Pellissier.

Brown’s proposal is designed to avoid a court challenge on a key issue: The widely held view that court rulings mean pensions promised state and local government employees on the date of hire can’t be cut without a new benefit of equal value.

The reform group’s plan is designed to withstand a court challenge because current workers could be required to “pay more for their same benefits and for a share of unfunded liabilities.”

In the reform group’s initiatives a curb on “spiking” (boosting pensions by cashing out unused sick leave, vacation time and other things to increase final pay) covers current workers, not just new hires as in the governor’s proposal.

Fritz’s article mentions a curb of one “abuse” that is in the governor’s plan but not in the reform’s group plan: a limit on “double-dipping” or the collection of a government pension and paycheck.

“We think there are some issues with folks who retire and their life circumstances change,” Pellissier said. “Their spouse dies and they have obligations they have to meet. We weren’t really comfortable weighing in heavily on double-dipping.”

Like the governor’s plan, the reform group’s initiatives have curbs on other abuses: retroactive benefit increases, the purchase of service credits or “air time” to boost pensions, and contribution “holidays” or reductions for employers and employees.

But the big difference is that the governor’s plan calls for “equal sharing” by employers and employees of the “normal” pension costs, what actuaries say is needed to pay for the current year.

That does not include the debt or “unfunded liability” that soared after the stock market crash and a weak economy dropped investment earnings well below the typical pension fund forecast, 7.75 percent, which critics say is too optimistic.

The governor’s budget last May estimated that the unfunded liability for the three state pension funds (CalPERS, CalSTRS and UC Retirement) was $121 billion over the next 30 years, not counting an additional $60 billion for retiree health.

A Stanford graduate student report last year, using a lower earning forecast of 4.1 percent, estimated that the unfunded liability for the three state retirement systems is about $500 billion.

The reform group’s initiatives address the unfunded liability by requiring equal “normal” cost contributions for employer and employees, except when the funding level of the system drops below 80 percent using federal private-sector pension standards.

Then government contributions to the normal cost would be limited to 6 percent of pay for most workers and 9 percent for police and firefighters. Employees would pick up the remainder of the normal cost until funding returns to 80 percent, potentially a significant increase over time.

Pellissier said employee contributions would be limited to an increase of 3 percent of pay a year. Current employees would have the option of switching to a lower-cost plan for new hires.

The original version of the initiative gives new hires a 401(k)-style plan. The alternative version would give new hires a “hybrid” similar to the governor’s proposal that combines a lower pension with a 401(k)-style plan and Social Security, if available.

Many public pension systems are below 80 percent funding now using government standards. Pellissier estimated that switching to private-sector standards could drop funding an additional 10 to 15 percent.

The reform group expects to pick one version of the initiative after they receive titles and summaries and an analysis by the Legislative Analyst, probably a week before Christmas.

Pellissier said the goal is to begin circulating petitions for signatures in early January. He said the signatures should be submitted by April 20 to ensure qualification for the November ballot.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 3 Nov 11

32 Responses to “Pension initiative faces two tests: funding, courts”

  1. Tough Love Says:

    Quoting …”The reform group’s initiatives address the unfunded liability by requiring equal “normal” cost contributions for employer and employees, except when the funding level of the system drops below 80 percent using federal private-sector pension standards.
    Then government contributions to the normal cost would be limited to 6 percent of pay for most workers and 9 percent for police and firefighters.”

    It would be VERY interesting to watch the reaction of the workers as this is implemented.

    With the cost of the 3% @ 50 pensions (when correctly calculated for an officer retiring at age 55 after 30 years of service) requiring a level annual total contribution of 58% of pay to fully fund over that officer’s career, that officer might have to contribute almost 50% of his/her pay towards their pension.

    Is it obvious that the REAL problem that needs to be addressed is that these pensions as simply WAY too generous …. and would remain far more generous than what Private sector workers get even if cut by 50%.

  2. Dr. Ted Steele Says:

    I like the Gov’s plan. Glad to se that these things are getting a bit more in line with common sense and the law. A close review of this one though will demonstrate the obvious unconstitutionality of it and savy funders will, as always, slip away. Brown has the righjt idea.

  3. Sue Says:

    I wonder how all the people out there who are for these initatives would feel if their benefits were decided by the general public instead of their company and themselves. Look at these initatives really close and you will find that most of them exempt the legistature from the cuts. The employees getting the most retirement money are upper management. The newspaper in our area stated the the average retirement check was $100,000. I decided to retire this year because I want to get that much (I get way less now and will get no way near that amount). Ask your Congressman/woman and any official how much their pension is going to be for just staying in the office for a few years. Bet it will be a lot more than most of us “Government” workers make for working all our lives service our community and interacting with our community. You see our faces every day, how often do you see their (well, except for on TV)?

  4. Lars Says:

    RE: Legislature
    The state legislature does not get pensions anymore, that is probably why they are excluded in the proposal.

  5. Tough Love Says:

    Quoting Sue Says …”I decided to retire this year because I want to get that much (I get way less now and will get no way near that amount). ”

    Did you really retire ASSUMING you would get $100K annually w/o checking with your Plan first ?

    So whose to blame for that ?

  6. Sue Says:

    I was joking. I am not going to get anything near that when I retire. I was just commenting that in our local newpaper, they stated that the average retirement amount is around $100,000. Statements like that are what get non-government workers upset about our retirement fund. I would have never have put in my retirement papers without investigating how much I would be getting and making sure that I would be able to live on it.

  7. SeeSaw Says:

    Its kind of ironic that the sponsors of these two inititiaves are current or future 100 per centers, themselves. These are Republican-led proposals. Shame on you, George Schultz–I guess leading the good life on your Fed. Government retirement check is very boring, so you have to get up, and kick a few little people around.

    Sue’s post tells it like it is. My former CM makes six times more than I. All these beneficiares of the huge pensions, like that of my former CM, were not in unions, either. I do not believe in the retroactive subtraction of benefits. that are already being provided, according to Law.

    The timing of this group is amazing, just as Governor Brown has submitted his 12-point, pension reform plan. The Legislature, and every sitting Governor, are always damned, regardless.

    I have issues with five of Brown’s 12 points, and have written him a letter, regarding such.

    Even Marcia Fritz, President of the CFFR, which was originally founded by Keith Richmond, has enough sense to stand apart, from these vultures.

    What is Libertarian, Lanny Ebenstein going to do, now.

  8. Rex The Wonder Dog! Says:

    Dr. Ted Steele Says:

    A close review of this one though will demonstrate the obvious unconstitutionality of it and savy funders will, as always, slip away.
    LOL…GED educated Nurse Teddy Steals giving advice on the CA and US Constitution. I love it!

    Teddy, do you give the brain surgeons advice too ;P

  9. Rex The Wonder Dog! Says:

    Sue Says:

    The employees getting the most retirement money are upper management.
    Actually Sue, front line, entry level emplpyees, the GED educated cops and firewhiners make up the vast MAJORITY of the ones in the $100K club.

  10. Ted Steele, Janitor Says:

    Poodle boi, You mean you still don’t see the blatent contract’s clause issue? And assuming you don’t see it, what authority would you cite if you were preparing the brief defending such an attack?

  11. SeeSaw Says:

    What documentation do you have that you can post to prove that, Rex? The list of the top ten CalPERS beneficiares does not state the postion held be each respective employee. I recognize only two names on that list, both former City Managers. If the other eight were not also City Managers, Department Heads, or assistants to Dept. Heads, I will eat my hat. Now, lets see your list of entry level, rank and file safety workers, who retired at the age of 50, with $100,000+ pensions.

  12. Rex The Wonder Dog! Says:

    Nurse Teddy, a legal scholar such as myself cannot even try to have an intelligent debate with an unarmed opponent such as yourself
    😛
    😉
    🙂

  13. SkippingDog Says:

    Several million dollars to qualify an initiative; several million more to run any kind of campaign. After all of the wailing and yelling, this clown has $250k in seed money and got a doddering old George Schultz to sign an endorsement.

    The people who want to screw the government employees either don’t have the bucks necessary to fund such a campaign, and the people who do have the money won’t waste too much of it on this kind of effort.

    Just another anti-government pipe dream.

  14. Rex The Wonder Dog! Says:

    Just another anti-government pipe dream.

    LOL…that is what the trough feeders are saying about Carl DiMaio’s comprehensive pension reform in San Diego too!

    And that is also what they said about —-wait for it——SURPRISE!!!!!—- Prop D, the San Diego Sales/Pension Tax last year. They rough feeders said Prop D was a going to pass hands down and any effort to kill it was just a “pipe dream”. Prop D lost 3-1, 4-1 if you take out the trough feeder votes.

    Skippy, you have been using a pipe alright, a crack pipe!…….and that aint no dream lil Buddy.
    🙂😛😉

  15. Ted Steele RN Says:

    Poodle— you are a sad little doggy…. How did I know that you could not come up with even one controlling case citation for your brief on the contracts clause issue? oh my this is too easy.

  16. SkippingDog Says:

    In case you haven’t notices, Rex, the City of San Diego doesn’t politically resemble the State of California in any meaningful way at all. It was always unlikely that San Diego voters were going to pass a tax increase in the depths of our current recession, and Carl’s plan will take years to litigate, even if it does pass next year.

    The “reform” measures in this article don’t have funding for petition circulation, much less a ballot campaign. Given the threat they pose to current employees, you can count on the opposition being able to raise tens of millions to thwart them, at the ballot box and, if necessary, through the courts.

    It’s just a pipe dream for you and your cronies, Rex.

  17. Rex The Wonder Dog! Says:

    Dr Teddy Steals, is it possible for you to operate on yourself?

    I think you have some sort of brain tumor that is interferring with thr firing of your peas sized brain synapses.

    Your best buddy, your true partner is pension crime, your one and only true friend-RTWD!

    🙂😛😉

  18. Rex The Wonder Dog! Says:

    In case you haven’t notices, Rex, the City of San Diego doesn’t politically resemble the State of California in any meaningful way at all.

    Actually Skipper, that is not true. San Diego is very similar to the state as a whole today. It is not republican nor democrat, but a pretty close mix of both. The navy and marine bases added a LOT of conservative votes, as did the defense sector, but the entire San Diego area/region has lost a number of military bases and their families and nearly ALL of its defense contractors. Top Gun moved to Fallon NV, the marines replaced it though, but the Naval Training Center closed down completely. San Diego used to have General Dynamics, which made the $200K per pop Patriot missles, lost all of it, they had a 10 acre campus and it is completely gone. Much of the aerospace industry that was there is also gone. So a ton of conservative voters are now gone. Balancing the voter mix.

    The San Diego pension sales tax was defeated by a 3-1 margin, which is a landslide, and the new statewide polls on CA supporting pension reform, major pension reform, was 71% as I recall. That is almost identical to San Diego.

    I think if the state wide pension reform hits the bollot that it will be a landslide similar to the 3-1 margin we saw in the San Diego pension sales tax.

    I say lets put it on the ballot, that is the one way to find out. Put it on the ballot-lets the people decide.

    Same with cutting pensions for current employees for service NOT YET WORKED. Change the plans going forward, then litigate it. Only way to find out is to litigate and let the judges decide.

  19. SeeSaw Says:

    RWD: Congratulations on a rare, decent post.

  20. Ted Steele RN Says:

    wow– that WAS INDEED a rare decent post from the poodle— yikes….spooky…..and who can argue with his conclusion? let the courts decide. As if it was going to happen any other way? What other branch of the gov. does the Constitution “let decide”? Since the poodle can give no citation for any authority trumping the contracts clause I guess this will be a case of fist impression…lol…I’m good!

  21. Rex The Wonder Dog! Says:

    SeeSaw Says:

    RWD: Congratulations on a rare, decent post.

    Seesaw, you know thsat was not a “rare” decent post, all of them are🙂

    Ted Steele RN Says:

    wow– that WAS INDEED a rare decent post from the poodle— yikes….spooky…..and who can argue with his conclusion?

    Teddy Steals, you know I am always correct!

    Your best buddy, your true partner is pension crime, your one and only true friend-RTWD!

  22. Rex The Wonder Dog! Says:

    seesaw, I bet you mniss OCobserver, you and him had a very strong, symbolic relationship. You two bicked back and forth like husband and wife.

    I knpw you miss OCO, you hve to seesaw😉 I asked OCO to come post with us, but so far he has not replied nor posted here.

    Even Teddy Steals misses OCO. OCO would shoot down Teddy Steals mutliple sock pupper accounts like a turkey shoot! It was very funny, but not as funny as when Teddy accused me of being an OCR employee because I could tell a Teddy Steals gimmick account a mile away!

    Teddy, I love you man🙂

  23. Ted Steele RN Says:

    Poor Poodle— I bet she is a 14 y/o girl. He claims to have the law to shoot down the contracts clause issue of the USC- but he never rises to the challenge to cite it here…

    and… he claims to have some story about me accusing him of being an employee but can never give us a cite to the record all of which is still on the ocr site…

    Yawn……zzzzzzzzzzzz…this is childs play….Yawn and…of course…lol !

  24. SeeSaw Says:

    No, I don’t think so, Rex. I debate only to impart true information–not to personally insult others.

  25. Ted Steele RN Says:

    SeeSaw is a better man/ woman than I am– I debate to impart and insult…sorry—- I only insult this clown because of the years of vile, hateful, ignorant and childish things he has said bravely behind his monitor in his Beck like bunker ! And…..of course to spin him up— which is …welllllllll…..ah….easy ….LOL

  26. Rex The Wonder Dog! Says:

    Ted Steele RN Says:

    SeeSaw is a better man/ woman than I am– I debate to impart and insult…sorry—- I only insult this clown because of the years of vile, hateful, ignorant and childish things he has said bravely behind his monitor in his Beck like bunker ! And…..of course to spin him up— which is …welllllllll…..ah….easy ….LOL

    Teddy Steals, why are you so mean to me…..you made me cry with that comment. I may never be able to post here again:)
    😛
    😉

  27. Rex The Wonder Dog! Says:

    SeeSaw Says:

    November 6, 2011 at 12:46 am
    No, I don’t think so, Rex. I debate only to impart true information–not to personally insult others.

    “impart ture information”!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Bwhahahah

    Oh seesaw, stop it, you’re killing me with laughter !!!!!!!!!!!!🙂😛
    😉

  28. Ted Steele RN Says:

    Poody— LOL— You’ll never be able to post again? LOL– I doubt it— unless your ocd meds run out !

  29. spension Says:

    Pellissier’s proposal of a cap of 6% pension contribution from the state (9% for safety) would be fine with me, with one or two quibbles….

    first, does Social Security gobble up that 6% immediately? The wording is not so clear to me.

    Then I think there is a grey area… for the benefits promised up until now, in many cases insufficient $ were contributed. My own guess is the courts (if the cases gets there) would not be kind to an institution that contractually guaranteed benefits, and then neglected to save enough money for them.

    That’s why I favor sovereign default… that is the standard way to get out of contractual obligations. Sure it will mess up State finances, but it is the way to go.

  30. SeeSaw Says:

    Costa Mesa is trying another way to get out of future obligations–become a Charter City. I hope that the voters of Costa Mesa see this dispicable move, for what it is.

  31. Tough Love Says:

    SeeSaw,

    How does becoming a “charter city” enable you to get out of debt ?

  32. SeeSaw Says:

    A Charter City is not regulated under many of the state laws, that General Law citites are. They are looking for a faster way to conduct their outsourcing plans.

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