Pension initiative may empower local reforms

The leaders of two local pension reforms, former San Jose Mayor Chuck Reed and former San Diego Councilman Carl DeMaio, are working with a coalition on a statewide initiative to help local governments make cost-cutting pension reforms.

DeMaio called the proposal a “tool kit” for local officials to “fix the problems in a manner that reflects their community’s ability.” Reed said the proposal would enable “measures that people can do to make their own decisions in their own communities.”

During a break at the Reason Foundation’s third annual Pension Summit in Sacramento last week, the two men said they are “on the same page” and working with a coalition on the details of a proposed initiative for the November 2016 state ballot.

DeMaio said the state constitutional amendment would apply to the state, cities, counties, other local governments, and the University of California — all the “instrumentalities” of California government.



“I’m very big on making certain that when we move ahead on reform that it’s unassailable in the courts,” said DeMaio.

The California Public Employees Retirement System, which opposed pension cuts in three recent city bankruptcies, and the state Public Employment Relations, which tried to block the San Diego and San Jose reforms, would be covered by the initiative.

“They will have no ability but to implement faithfully the voter’s initiative,” De Maio said.

A case in point for local empowerment: A drive led by David Grau and others gathered enough signatures to place an initiative on the ballot last fall to switch new Ventura County employees to a 401(k)-style plan.

But a superior court judge removed the initiative from the ballot, ruling that nothing in the 1937 act covering 20 county pension systems allows them to “opt out or terminate” through a countywide initiative or a vote of the county supervisors.

Empowering the reform process is a big change from past statewide proposals for a specific plan, such as former Gov. Arnold Schwarzenegger’s briefly backed 401(k)-style plan in 2005 or Reed’s lower-cost pension option in 2013. None made the ballot.

“One size doesn’t fit all,” said De Maio.



Reed said a statewide initiative should be “simple and easy to explain.” He said a “big omnibus” pension proposal is difficult to explain and easy for opponents to mischaracterize.

A structural initiative is common ground for a Democrat (Reed) and a Republican (DeMaio) who led the campaigns for two very different local pension reforms overwhelmingly approved by voters in June 2012.

The San Diego initiative, overcoming a PERB lawsuit to keep it off the ballot, switched all new hires except police from pensions to 401(k)-style individual investment plans now common in the private sector.

In San Jose, the reform gave current workers the option, for pensions earned in the future, of paying more or receiving a lower pension. A superior court blocked the option. Reed said other parts of the initiative have saved $80 million to $100 million so far.

Another thing the two battle-tested reformers have in common is experience in laying the groundwork, moving in steps, and not trying to do everything at once, which seems to be the current strategy of the statewide initiative.

Before the big reform in 2012, Reed changed the San Jose pension boards, adding independence and expertise. He backed two successful ballot measures in 2010 limiting police and firefighter arbitration and allowing switches to lower pension plans.

DeMaio backed a ballot measure in 2006 requiring voter approval of pension increases, city council approval in 2008 of a “hybrid” combining a lower pension and 401(k)-style plan, and a 50-50 employer and employee split of pension costs in 2009.


Dozens of government employees picketed the appearance of Reed and DeMaio at the Reason pension summit, an early warning from a coalition of public employee unions that a pension initiative may be opposed at every step, including the first one.

Schwarzenegger dropped his 401(k)-style plan in April 2005 after emotional union television ads contended death and disability would be eliminated for police and firefighters and their families, a claim the governor disputed.

After former Assemblyman Roger Niello, D-Sacramento, filed a pension reform initiative in 2011, the union coalition picketed a luxury auto dealership he partly owned, with one sign saying, “Pensions not Porsches.”

Major donors to a new initiative might face the same campaign tactics. The number of voter signatures needed to place a constitutional amendment on the ballot next year is 585,407, down sharply from 807,615 last year due to low voter turnout in November.

But several million dollars probably would be needed for a signature drive, particularly to screen for false signatures (opponents are sometimes accused of providing) and to gather a surplus as a safety cushion.

A news release from the union coalition, Californians for Retirement Security, said the new initiative is expected to be financed by “Texas billionaire John Arnold, a former Enron executive” who contributed to the Reed and Ventura County initiatives.

In San Diego, paid signature gatherers for the pension reform initiative posted at retail stores were often joined by “blockers,” union members and others who urged shoppers not to sign the petition.

Time and money may be needed for court battles after an initiative is filed. Reed dropped his initiative last year contending that Attorney General Kamala Harris gave the measure an “inaccurate and misleading” summary that made voter approval unlikely.

Dan Pellissier of California Pension Reform suspended a pension initiative drive in 2012 “after determining the attorney general’s false and misleading title and summary makes it nearly impossible to pass.”

Pension reform had strong support in a Public Policy Institute of California poll in January last year. Public pensions were “at least somewhat of a problem” for 85 percent of likely voters, and 73 percent supported switching new hires to 401(k)-style plans.

“Without serious pension reform in California, we face a future of cuts to important services and more tax revenues diverted to unsustainable pension payments,” Reed said in a news release last month.

“It is clear that politicians in Sacramento are not serious about reforming unsustainable pension benefits for government employees, so voters must take the matter into their own hands and impose reform at the ballot box,” DeMaio said.

Dave Low, chairman of Californians for Retirement Security, had a different view in a news release issued by the union coalition last week.

“This new effort is likely to eliminate retirement security for millions of more Californians, worsen economic inequality in our state, and undermine the ability to attract and retain quality firefighters, teachers, police and other public servants,” Low said. “We are confident we can defeat it.”

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 13 Apr 15

5 Responses to “Pension initiative may empower local reforms”

  1. John Moore Says:

    I have reviewed the first draft of the latest Initiative proposal. It is a great improvement over the earlier petition because it is simple. It is a constitutional amendment that has priority over any other provisions of the constitution or state laws.

    It did contain a second provision with a committee type procedure that must be deleted. It is the type of provision which would build
    delay” into the process.

    The San Bernadino case involved the “county” system that had a code provision prohibiting termination without the consent of the unions, which was not obtained. The CaLPERS system does not have such a provision, and if it did, the new proposed initiative would trump it.

    While I believe that the improved initiative should withstand legal scrutiny, the fight from the unions, city and county attorneys and city and county managers and administrators will be viscious. If they prohibited three cities from modifying mathematically destructive pension plans, leaving those cities in dire financial condition, in their Chapter 9, bankruptcies, you can imagine their power.

    And the press will be key. To neutralize the ignorant press, a large advertising budget for local newspapers is required. Otherwise, the unions et al will rule the day though an ignorant press, which has been a strong enabler of the pension mess. The proponents should use judge Kleins” rulings in the Stockton case as the alternative to the initiative and should take active steps to make the Chaper 9 process less expensive for hundreds of bankrupt cities and counties like Oakland and Pacific Grove.

  2. SeeSaw Says:

    City of San Bernardino employees are members of CalPERS!

  3. Matt Says:

    Um, John Moore–the state can’t make the “Chapter 9 legal process less expensive” because Chapter 9 is governed by federal bankruptcy law,not state law.

    Next, the case you referred to is not the “San Bernadino” (sic) case, but a case from Ventura County. In addiition, the legal issue in the Ventura case was not the “consent ofthe unions” as you put it, but the fact that state law does not allow termination of a system without legislation by the state.

    And to think the ballot proponents are giving you drafts for legal analysis.

  4. John Moore Says:

    You are correct it was Ventura county. My mistake. The government code under the 37 Act for counties does allow termination with the consent of the unions. CAlPERS specifically provides for Termination; that is why they give an annual termination cost. As to the cost of bankruptcy, I am well aware that it is a federal system, but that does not mean Ca. lawyers and pension reformers can’t work to make the process less expensive. Several Attys. are working on that problem. FYI, there are numerous Ca. cities that are bankrupt but can’t afford the cost.

  5. Bob Says:

    John Moore:

    No, the 1937 Act does not allow a County to end the pension system for the county employees with the consent of the unions. As the Judge wrote in the Ventura decision, only a district (a political subset of a governing unit in a county) may move to withdraw from a systemand only when that districts is presented a petition by the majority of the district’s employees and officers. (NOTE–the word “union” does not appear anywher in the stautute) Government Code sections 31564 and 31564.2

    As to Counties, there is no method for a county to optout or terminate its participation, because there is no government code section allowing counties to exit the 1937 Act.

    Here is a link to the court ruling.

    Click to access 1494644-final-ruling-trial-court.pdf

    I challenge you, John Moore,to support your statement by citing the Government Code section which allows for “termination with the consent of the unions.”

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: