Ballot-box pension reform wins first court test

A superior court judge this month upheld a voter-approved initiative giving lower pensions to all city of Menlo Park new hires except police, the first court ruling as unions challenge similar measures in Pacific Grove and Bakersfield.

Voters in the three cities approved cost-cutting pension reforms in November 2010 that bypassed bargaining with unions. California is one of only several states where public employee retirement benefits are set by labor negotiations.

The measures in the small cities of Menlo Park and Pacific Grove, with relatively wealthy and well-educated residents, were overwhelmingly approved by more than 70 percent of voters.

In the much larger and more diverse Bakersfield, a measure that sharply cuts the pensions of new police and firefighters, not other non-sworn city employees, was approved by 56 percent of voters.

(A twist on ballot-box pension reform: Riverside County deputy sheriffs put a measure on the November 2010 ballot requiring voter approval to cut the pensions of new officers and firefighters, receiving 53 percent of the vote.

(But a counter measure backed by county supervisors allowing pension cuts for new hires and requiring voter approval of pension increases received 61 percent of the vote, becoming the new law because it received more votes.)

The measures in the three cities, which are in the giant California Public Employees Retirement System, set the stage for widely watched votes next month on pension reforms in the state’s second and third largest cities.

Voters in San Diego and San Jose, charter cities with “home rule” power under the state constitution and their own pensions systems, are being asked by their mayors and others to cut pensions earned by current workers in the future.

Unions oppose the measures that have become an issue in the San Diego mayor’s race and an open seat on the San Jose city council. The San Jose measure was placed on the ballot by a narrowly divided city council.

Pension reformers, unable to get a majority of city council votes, gathered voter signatures for initiatives in San Diego and Menlo Park. After signatures were gathered in Pacific Grove, the council enacted the measure confirmed later by voters.

Being able to bypass a city council, where members may rely on union support, is one argument for ballot-box pension reform. Critics say setting pensions through local bargaining, rather than statewide legislation, tends to drive up employer pension costs.

If one local employer raises pensions, unions ask other employers to match the benefit to remain competitive. A CalPERS-sponsored bill, SB 400 in 1999, gave state workers a major retroactive pension increase.

A report last year by a nonpartisan watchdog, the Little Hoover Commission, said SB 400 started “a chain reaction of retroactive pension increases granted to public employees up and down the state” and is regarded as “pivotal” in the pension crisis.

Some union leaders contend there is little hard evidence for the alleged “ratcheting up” effect of bargaining. Unions also say that pensions are a form of compensation, and therefore an important part of collective bargaining.

The Pacific Grove measure was an early attempt to cut current-worker pension costs. Reformers say employer savings from cutting new-hire pensions can take decades, and bargaining higher worker pension contributions often requires offsetting pay raises.

Pacific Grove’s Measure R caps the city contribution to pensions at 10 percent of pay, requiring employees to pay the rest or choose a low-cost option like a 401(k)-style individual investment plan.

In addition to filing a lawsuit, a police union also persuaded the state Public Employment Relations Board to issue a complaint charging the city with violating labor laws.

The labor-friendly board attempted earlier this year to get a court to block the San Diego pension measure from the ballot, unsuccessfully arguing that union negotiations were required first and then a vote of the city council.

A report to the Pacific Grove city council this month said agreements reflecting Measure R have been made with general employees and management. The city is using part-time employees when possible to reduce pension enrollment.

“Other elements of the strategy — including successful resolution of both the PERB claim and lawsuit initiated by the POA, as well as either withdrawing from CalPERS or working with CalPERS to implement additional plans, including one or more hybrid plans that feature defined contributions — are well underway but will take many years to fully realize,” said the report.

In Bakersfield, Measure D gave new police and firefighters the pension used before the SB 400 increase set off a wave of increases. The new hires also must make the full employee contribution, 9 percent of pay, paid in the past by the city.

The Measure D sponsor, Zack Scrivner, a former city councilman now a Kern County supervisor, said the measure is being implemented. But a police union has asked state Attorney General Kamala Harris for a legal opinion.

“Did the city of Bakersfield usurp the rights of BPOA (Bakersfield Police Officers Association) by placing Measure D on the Nov. 2, 2010, general election ballot?” is the request for a “quo warranto” ruling listed on the attorney general’s website.

A drive to place a statewide pension reform initiative on the ballot was suspended in February because the “attorney general’s false and misleading title and summary makes it nearly impossible to pass,” said Dan Pellissier, president of California Pension Reform.

The Menlo Park initiative, Measure L, lowers the pension for new hires, except police, from 2.7 percent of final pay for each year served at age 55 to “2 at 60,” extends the full retirement age from 55 to 60 and requires employees to pay their contribution.

“We did not have a city council that was supportive of Measure L,” said Henry Riggs, one of the initiative leaders. “I think we had two who were supportive and three who were not.”

The decision upholding Measure L issued by San Mateo County Superior Court Judge George Miram on May 4 said state law allows retirement systems to be established by a majority vote of the people or a two-thirds vote of the city council.

The judge said Measure L is regarded as establishing a new system for new hires, not a change in the system for current workers. He said Measure L is therefore “not an invalid use of the local initiative power.”

A union attorney, Teague Patterson, said a decision about an appeal has not been made. Among the concerns, he said, is a “slippery slope” toward inadequate retirement benefits and undermining the employer-employee “balance” intended by state law.

If ballot-box pension reform continues to pass court tests, unions may seek legislation to curb the trend.

When the bankruptcy of Vallejo raised concern the process might overturn labor contracts and cut pensions, unions backed legislation requiring cities to get the approval of a labor-friendly state commission before declaring bankruptcy.

A weaker version requiring mediation or a fiscal emergency is being used as Stockton tries to avoid bankruptcy. Reportedly unhappy with the process, unions are backing a bill, AB 1692, opponents say could strengthen the mediator and allow delays.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Posted 14 May 12

20 Responses to “Ballot-box pension reform wins first court test”

  1. Tough Love Says:

    Ultimately (because suficient money does not currently, nor wll it ever exist), Union efforts to stop/stall reform will fail, and the longer they delay reform, the greater they likelihood that those Plan failures will be catastrophic for Plan members.

    Plan members are advised to “pay attention”, NOT blindly follow Union rederic, and demand that Union officials have some skin in the game ………… by ending special and separate pension Plans for Union officials that are always fully finded and will pay full benefits even if the Members’ Plans fail.

  2. Ted Steele, American Says:

    T Lover— You are wrong. Calpers is 233 billion—- it goes up and down—at this rate it will be here for decades and probably longer when all the sustainability issues get ironed out. Save your tired mantra— still not buying.

  3. Tough Love Says:

    Sorry TEDS, CalPERS “assets” may be $233B, but it’s “liabilities” (when properly accounted for … without the myriad of gimicks to make them look smaller than they legitimately are) are roughly $350B. That’s a recipe for disaster ….. VERY difficult to overcome.

    Doom, or if not great pain (for Plan members, NOT simply taxpayers) if part of CalPERS future.

    Greed HAS consequences.

  4. gery katona Says:

    The curernt system is underfunded, doesn’t matter that the fund has $233B in assets. CalSTRS is in worse shape. The state’s contribution to CALPERS is up to $3.7B/year and that will only go higher in the future. The Democratic Governor has asked for a sustainable system which it currently is not by the tune of $3.7B annually. What is the solution? This is huge problem. The public sees a system of fat pensions combined with early retirement, as a lose-lose situation that must be fixed. It should not be a surprise that cities are going to the ballot box for action.

  5. Ted Steele, American Says:

    wow– are you ever beating a dead horse— like your mortgage it aint all due today little buddies. It will be around for 40 years and in time to add new tiers and highs and lows of the econ…give it a rest— still not buying in.

  6. Tough Love Says:

    Sorry Ted, another lousy analogy. If you want to use mortgages, CalPERS current underfunding is more akin to having a monthly payment of $2,500, but paying only $1,500/mo for years, accruing an IOU (think unfunded “liability”) of many thousands.

  7. UptightTO Says:

    If you’re having a discussion with one who is a Calpers member about pension refrom you’ll lose them eveytime when you bring up unfunded liabilites. Instead they want to talk about Calpers assets or remind us that ” a deal is a deal” suggesting that if Calpers runs short of money it’s still the obligation of taxpayers fund thier retirements..My solution…eveyone contribute to Social Secirity and particpate in a 401K program…problem solved…

  8. Ted Steele, American Says:

    TL— I will give you partial credit for your analog –I give you that…But—-YOUR analogy ignores market upswings and fund deltas……THAT is why Calpers is over 80 years old– we all agree to reform— but you guys want to throw the baby out with the bathwater

  9. Ted Steele, American Says:

    uptight— Unless you live in Somalia or someplace where you make up the law as you go along—- “a deal IS a deal” — sorry—– we can’t pretend we don’t have a Constitution and 250 years of stare decisis.

  10. UptightTO Says:

    Ted…Stare decisis is a legal principle by which judges are obliged to respect the precedents established by prior decisions. OK, no argument unless the underlying law is deemed unconsititional. One can make powerfull constitionally based arguments against the rights of public servants to collectivily bargin. FDR and George Meany, the powerfull union boss, both believed public servants should not have the right to bargin collectivily and that to grant them that right is to subvert the democratic process. Bottom line…I believe that everyone from the POTUS down to the lowly secretary at city hall should all be on an equal basis with average private citizens. What is it about serving the public that justifyes opting out of SS and 401K plans? What is they do that entitles them to benefits and retirement plans that are proven to be better and often much better than can be had on the private side?

  11. Tough Love Says:

    Uptight …. and adding to you last sentence ….. all while your “cash pay” is no less than those Private Sector workers.

  12. UptightTO Says:

    Tough love…would please expound on your post? Not sure what you mean when you write “cash pay”

    Thank You

  13. Tough Love Says:

    UptightTO, In the last sentence of your prior comment you said …”What is they do that entitles them to benefits and retirement plans that are proven to be better and often much better than can be had on the private side?

    By my adding to the end of YOUR sentence the words ..”all while your “cash pay” is no less than those Private Sector workers.” ………… I was pointing out that an attempt at Public Sector “justification” for greater pensions & benefits by asserting that they get lower “cash pay” would be false ….hence there is NO JUSTIFICATION for their greater pensions & benefits.

  14. UptightTO Says:

    You are 100% right. There is no justification for greater pension and benefits. Maybe that’s why when you ask a state worker what entitles them to bigger better pensions you never get a straight answer.

  15. Tough Love Says:

    UptightTO … You’re correct …. go ahead and ask “Ted Steele” (above) the question .. and yu’ll have a good laugh at the nonsensical/non-responsive reply.

  16. Ted Steele, Legend in the mind of all trolls Says:

    LOL— Toughy—- I have never said that state workers are entitled to better benees or pensions than private workers. Never.

    Now in certain cases maybe yes. A Police officer vs a chef? A Fireman vs. a bank teller? Maybe the danger counts for something.

    What I have said is that what has been contracted for, earned, and executed has to be honored.

    Now, little buddies, how is that a non responsive answer?


    Teddy boy

  17. UptightTO Says:

    Thanks Ted. We agree. I live in a community of 33,000 and a little over a year ago a newly elected City Council woman did some digging and discovered our city manager receives over $430,000.00 a year in compensation and that our city emplyees are paid 5% over the average of comparable positions in other California cities. The city also picks up their contribution to retirement benefits. Why? Per the mayor, the city manager was the best in the state and in order to keep him and retain good empolyees the city council thought it wise to award them over the top wages and benefits. So when this all came to light and citizens began to realize how gernerous the city council was at our expense the citizens were justifiable upset. So fearing their wages and benefits might take a hit our city employees formed a union. Bottom line…the empoyees knew that if they formed a union the citizens would be forced to insulate them from this terrible recession/depression and while neighbors were losing their homes to foreclosure our city employees had the gaul to put themslevs first and stick it to the citizens.

    We’re angry. But try and fire one of these bandits 90% of whom don’t even live in our community. You can’t and now the union is negotiating their wages and pensions in closed door sessions with the city council NOT in an meeting open to the citizens. Democracy? This isn’t democracy it’s what known in Mexico as “The Mordida” the bite.

    So when public servants whine about how bad they have it or say things like…”you must pay us because a deal is a deal” it falls on deaf ears. There are tens of thousands of people just as qualified that will do their job with a smile for pay and benefits comparable to the private sector and that goes for cops and fireman too.

    And for those who would call private citizens haters …..Come on we don’t hate you…Join us in our fight. Tell your union bosses to pound sand and quit allowing them to use your dues money to buy politicians.

    And finally a hypothetical question to those who swore an oath to serve the public. If your union boesses called for a strike what would you do? Would you cross the line and honor your oath of service or would you let them hold us hostage to your demands? Who’ll be the first to answer?

  18. gery katona Says:

    That is a pathetic story, but sadly not out of the ordinary and just shows how bad things are. And I’ve heard this story many times, “Per the mayor, the city manager was the best in the state and in order to keep him and retain good empolyees the city council thought it wise to award them over the top wages and benefits.” This was a scheme originated by the unions to pit one city against another with the goal of inicreasing wages and it seems to have been worked in many cases. You would think there was a shortage of talent to take these jobs. I don’t think so. The unions stuck it to the citizens again. Frankly, I don’t have a problem with unions in general, they are needed to make sure employees are treated fair. It is all about fairness though and ahosuld begin and stop there. But too often there is abuse of power going on and that is when the unions need to be restrained. Another example is stated above, “now the union is negotiating their wages and pensions in closed door sessions with the city council NOT in an meeting open to the citizens.” This exact same thing has happened all around the state. How corrupt is this? Gee, do you think they are trading favors at the citizens expense? Of course they are. This is why serious reform is needed.

  19. Ted Steele, American Says:

    Uptight– Good points

    Excessive compensation is excessive compensation and it needs to be wiped out. I don’t throw the baby out with th bathwater though and look also at average salaries and pensions and have zero problem with them.

    I would be loathe to strike, yes. I would never say never though.

    I too think that our union nees to conceede sometimes in tough times. i think my union does.

    I have spent a lifetime in government and I would agree that waste is waste and we always need to watch our gov to be sure our tax dollar is used wisely. Often it is and often it is not.

    Ted the Reasonable.

  20. Tough Love Says:

    Ted, Reasonable? You’re retired and pay no Union dues, and want what been “promised”. Since you are no longer accruing anything … that means 100% for you … no compromise (from YOUR funds) no giveback, no nothing.

    Your pensions, approved by those who accepted Public Sector Union campaign contributions, and colored by the self-interest of the approvers, are excessive by any rational measure. As such, haircuts from retirees (as well as “actives”) are in order.

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