Pension initiative refiling may include legislation

A bipartisan group announced the end last week of an attempt to put a public pension reform initiative on the ballot this fall, aiming instead for the November 2018 ballot. Its refiled initiative also may be put into a bill in the Legislature.

A bill that would cut the growing costs of state and local government pensions by reducing retirement benefits for new hires presumably would be dead on arrival.

Cuts in retirement benefits are opposed by powerful unions and their Democratic allies, unless agreed to in bargaining. Gov. Brown had the leverage of gaining public support for a tax increase to get legislation in 2012 that yields modest pension savings.

But for the reform group, a bill could result in a legislative hearing publicizing a proposed initiative, expose flaws or errors that need correction, and provide a minor campaign talking point: We tried to get the Legislature to do it.

And in theory, a hearing could provide a public service with a four-year checkup on the previous reform, a forum for local governments to report the impact of rising pension costs, and an updated debate on whether pensions are affordable or unsustainable.

Chuck Reed, a Democrat and former San Jose Jose mayor, said the group he leads with Carl DeMaio, a Republican and former San Diego councilman, is considering legislation for the proposed initiative they plan to file late this year.

“We have thought about that, and talked to some members of the Legislature about it, and we may,” Reed said last week. “That’s not off the possibility list.”

There is no guarantee that a bill containing the proposed initiative would get a legislative hearing. If the initiative is a state constitutional amendment, Reed said, the bill would go to the rules committee and may not get a hearing in a policy committee.

“That wouldn’t stop us from doing it,” Reed said. “So, it is something we are considering.”

Reed

Reed

The group has struggled with choosing a type of reform, getting an initiative title and summary from state attorney Kamala Harris they think won’t repel voters, and raising money needed to put an initiative on the ballot and counter an opposition campaign.

“We are skeptical that donors will have any confidence in these two failed politicians who have repeatedly bungled efforts to put their poorly-written efforts to gut retirement security for millions of Californians on the ballot,” Dave Low, spokesman for a union coalition, said in a news release last week.

“They can be assured that any scheme they cook up for 2018 will meet the same fate of their previous efforts because we will fight it with our full arsenal,” said Low.

Three years ago, Reed was joined by the mayors of four other cities (only one a Republican) in filing an initiative for a state constitutional amendment allowing what the watchdog Little Hoover Commission and others think is a key pension reform.

The pensions current state and local government workers have already earned through service on the job would be protected. But the pension amounts they earn in the future could be cut.

“The Legislature should give state and local governments the authority to alter the future, unaccrued retirement benefits for current public employees,” the Little Hoover Commission said in a 2011 report.

Private-sector pensions can make cuts in future pension earnings to control costs. But in California, decades of state court rulings are believed to mean the public pension offered on the date of hire can’t be cut, unless offset by a comparable new benefit.

As a result, most cost-cutting pension reforms are 1) limited increases in what employees pay for their pensions, mainly by eliminating employer pickups of the workers’ share, and 2) lower pensions and retiree health care benefits for new hires.

These reforms can take decades to yield significant cost savings, as employees with “vested” rights to the previous retirement benefits offered when they were hired are gradually replaced by workers with the new lower benefits.

San Jose voters approved a Reed-led measure in 2012 allowing the city to cut the future earnings of current workers. That part of a broader pension reform was blocked by a superior court, a ruling that will not be appealed under a city settlement with unions.

The similar statewide initiative filed by Reed and the mayors received a title and summary from Attorney General Harris Reed said was “inaccurate and misleading.” A court disagreed, declining to order a rewrite, and the initiative was dropped.

A poll conducted in 2013 for the union coalition found that “eliminating public employees’ vested benefits” is viewed “very unfavorable” by most voters and the word “eliminating” fosters a “visceral negative response,” the Sacramento Bee reported.

Pensions for new hires, not the vested rights of current workers, were the stated focus of an initiative filed last June by the coalition led by Reed and DeMaio, one of the leaders of a 2012 San Diego initiative giving new hires (except police) 401(k) plans instead of a pension.

But the title and summary issued by the attorney general, agreeing with unions that the initiative was being misrepresented, said it “eliminates” the “vested pension and retiree health care benefits” of current employees for work done in the future.

Last October, the coalition filed a simplified version of the initiative likely to give new hires a 401(k) plan, unless voters approve a pension, and a second initiative capping spending on retirement benefits at 11 percent of pay, 13 percent for police and firefighters.

The title and summary issued for the two initiatives by the attorney general in December said they affect new employees, with no mention of “eliminates” or the “vested rights” of current workers.

A poll circulated by the union coalition, done for Capital & Main by Binder in December, found 42 percent in support of the likely 401(k) plan and 40 percent in support of the spending cap.

Reed said the coalition’s own polling found higher support, the most for the cap, that is enough to win — but not without a well-funded campaign to counter the “full arsenal” of union opposition.

His rough estimate is that $3 million is needed to gather the voter signatures required to place a constitutional amendment on the ballot and $25 million for the campaign. Reed has raised money for San Jose pension measures in 2010 and 2012.

He thinks donors can be found among good-government fiscal advocates in high-tech, wealthy conservatives concerned about pension debt and tax increases, and Democrats who do not want pension costs to crowd out funding for government services.

A Reed-DeMaio statement last week said that after discussion with coalition members and key donors, the decision was made to “re-file at least one of our pension reform measures later this year for the November 2018 ballot.”

A better reform environment is expected then as “rising pension costs further squeeze” government budgets, they said, and a pending U.S. Supreme Court decision (Friedrichs v. California Teachers Association) may reduce union money available for an opposition campaign.

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 25 Jan 16

14 Responses to “Pension initiative refiling may include legislation”

  1. john m. moore Says:

    Again,Mr. Mendel says decades of court decisions say that benefits offered on the date of hire can’t be cut without making off-setting benefits. That is true, if, and only if, the pension benefit was granted in a contract or statute that clearly stated that the benefit was for life(State Bar Seminar on Vested Pensionj Rights(june, 2015). Also, no off-set is required if the pension plan is financially unsustainable via. the second ruling in Kern.
    Mr. Mendel, by mis-stating the law, has done more to hurt pension reform than any other writer about the subject. The California Rule that holds in addition to earned benefits, but also benefits for work not yet performed, applies if a court has found that the contract or statute granting the benefit was for life and not just for the term of the contract, or until the statute was repealed. There is a presumption that a benefit granted by a contract or statute is not vested. The Key is an analysis of the contract or statute that granted the benefit. In all of the cases referred to by Mr. Mendel, there was a finding that the employees had a “vested” pension right and thereby were protected by the California rule. Read the State Bar seminar Ed. You are killing pension reform.John M. Moore

  2. john m. moore Says:

    Further points for Mr. Mendel: In the San Jode case, both sides stipulated that the reform applied to “new hires.’ In the San diego case the reform applied to new hires, subject only to a claim by PERB that Myers Milias and Brown was not heeded. Numerous cities and counties have adopted ordinances that limit pensions for new hires. All of the reductions were w/o a constitutional amendment. So much for your(and PERS) date of hire theory.

  3. Greg Lamon Says:

    The claim that vested public workers and retirees would be protected is misleading, as the Reed-DeMaio reform proposals would starve pension funds of anticipated cash inflow thereby jeopardizing their sustainability. A second consideration is that the 2013 state PEPRA pension reform law already cuts future benefits to new hires, so what is new about this proposal?

  4. Andrew Kubik Says:

    The PERS pension plans I’ve noticed through the years are entitled or described as lifetime plans and as far as I know, they have been negotiated and contractually binding. What does Mr. Moore think a pension is intended for?

  5. Pete S. Says:

    “San Jose voters approved a Reed-led measure in 2012 allowing the city to cut the future earnings of current workers. That part of a broader pension reform was blocked by a superior court, a ruling that will not be appealed under a city settlement with unions.”

    Ed, your summary of Reed’s San Jose initiative is incomplete. The San Jose City Council agreed five months ago to invalidate Reed’s initiative, which amongst other things required current employees to pay substantially more into the pension system and changed the disability processes.
    http://www.mercurynews.com/bay-area-news/ci_28700793/measure-b-settlement-at-top-san-jose-council

    As for John Moore–his ramblings on “vested rights” are utter nonsense. There is no case–NONE–that holds “benefits for work not yet performed, applies if a court has found that the contract or statute granting the benefit was for life and not just for the term of the contract.”

  6. john m. moore Says:

    The Ca. Rule related to work not yet performed is a minority view, but all states require proof that the right was vested(non-repealable or survives the term of the contract). Just last year the U.S. Supreme court found that a claimed vested union contract right was not vested and therefore, expired with the term of the contract.
    We all know that social security promises are not vested and are routinely deminished.
    I have previously offered the State Bar Seminar materials for all to read. just request it a jmerton99@yahoo.com and I will e-mail it to you. They are the state Bar “ramblings” not mine.
    In the San Jose case, the writer is correct. A new union majority council set aside the part of the citizens initiative that per stipulation applied to new hires. In addition it granted the safety unions a 17% raise. San Jose is DOA and certainly bankruptcy bound.

    But what is really bothering those of you who hope for a lottery type pension is this: since public employee unions, Ca. has gone from first to the bottom in every govt. service area: schools, roads, highest taxes, high crime, homelessness, poverty, parks, etc. and you don’t want to feel guilty about it. So instead of looking at the trillion dollar pension deficit, you focus on rumor and wishes. The trillion deficit is headed for three trillion, which will grow at $220 billion a year(more tha the state budget)
    PEPRA is a fraud: its political purpose was to lock new hires in at a 2.7% pension, a level that will continue to create trillion dollar deficits on and on. Jerry Brown has sold his soul and this state to the govt. unions. It is a tragedy, the ultimate evil.
    Why do I care? I just do. Sitting by doing nothing allows evil to prosper. It can’t and won’t go on, but the damage to our citizens is frightening.

  7. SeeSaw Says:

    Mr. Lamon, PEPRA does not abolish DB pension plans. The Reed-DeMaio initiative, as written, forbids entities from giving new hires DB plans,unless a special election is held and the voters approve–like that would ever happen.

  8. Pete S. Says:

    Wowser, John Moore!. This passes for “legal argument!” I can see you now in court.

    Judge: Mr. Moore, can you cite me a relevant published California decision that supports your position on vested rights?

    Moore: Just last year the U.S. Supreme court found that a claimed vested union contract right was not vested and therefore, expired with the term of the contract.

    Judge: That’s not a decision based on California law, regarding California pension rights—and is not relevant to this issue..

    Moore: Well, we all know that social security promises are not vested and are routinely deminished.

    Judge: Again, Mr. Moore, please focus and cite me a relevant published California case that supports your view, and quote me the language from the case.

    Moore: I have some State Bar Seminar materials for you to read……. They are the state Bar “ramblings” not mine.

    Judge: Seriously???!!

    LOL!, John Moore, LOL!!

  9. Tough Love Says:

    The impossibility of the “math” will bring an end to the pensions as they now exits.

    It just a shame how much damage will be done as we traverse that path.

  10. John moore Says:

    The seminar has the cases. Your response is a cruel ruse to ignore the truth. Your ignorance of the law of Vested rights is like a family lie, just tell it over and over. The law of vested rights is a contract principle . It is like 2+2=4. Pension deficits are a crisis matter. It is sustained by men who don’t want to know; men who ignore simple suggestions, like you might want to stop and ask directions. Do you want the Seminar documents or not? Then you can razz the lawyers that researched and wrote it.

  11. john m. moore Says:

    Ok. This is the lead case, but you are not going to like it. Let me tip toe you thru it.
    The leading case on vested contract rights is Kern v.City of Long Beach 29 Cal 2d 848. Long Beach had granted a 50% of salary pension for employees who had worked for 20 years. Note: The benefit had been granted by a statute-a charter provision. The court said: The question to be determined is whether the petitioner (employee) had acquired a vested right that could not be abrogated by repealing the charter provision…” Note, the benefit was not earned simply by accepting employment when there was a benefit in effect. To determine whether the benefit was “vested” and could not be repealed the court examined the charter provision to determine whether it granted a Vested right as opposed to a repealable benefit.
    The court went on to say that charter provisions similar to that in this case had been held to grant a vested right that could not be repealed. Note: there was no vested right by every govt. employee by simply accepting employment wity a benefit in place. The court had to find that by that specific language a vested right had been granted. If you and Mr. Mendel were right, no such inquiry would have been undertaken.
    And in fact there is a legal presumption that a statute or contract that confers a benefit does NOT grant a vested right. In the Cory case the supreme court found that a series of statutes granted teachers vested rights, but it took 20 pages of explanation to overcome the presumption that statutes and contracts do not grant vested rights. Regards, John

  12. john m. moore Says:

    Just to top this off. In REAOC v. Orange Co. employees claimed an “implied right” to a benefit granted them vesting, meaning in perpetuity. In an advisory opinion to the federal court, the Ca. supreme court advised that where a contract or statute is insufficient to creat a vested(in perpetuity) benefit, it is theoretically possible to show the implicit vesting under Ca. law, but the evidence must be “unmistakeable” and it must over come the presumption against vesting. The case went back to the federal trial court which granted summary judgement against the employees.

    Here is my point: if Mr. Mendel et al are correct that no contract or statute is necessary to create a vested right why would there ever be a need to inquire into whether a contact or statute that was insufficient to grant a vested benefit may, if there is sufficient evidence, create one by implication. Vested benefits must be granted by the employer; if not they expire or may be repealed.

    It would be nice if anti-reform parties would do the math, admit that the lottery pensions have caused govt. to fail and to help fix it before Californias “Detroit” hits. Do the math.

  13. Pete S. Says:

    “Vested benefits must be granted by the employer; if not they expire or may be repealed.” Keep telling yourself that, Johnny. It’s as credible as a claim by Reed or DeMaio that their pension initiatives are “bulletproof”. LOL!

    Johnny Moore, I’m sure your anti-public employee views and wacky interpretations of case law will be lapped up over in the fever swamps of “unionwatch”. LOL!

  14. john m. moore Says:

    Again Chippy, why would there ever be an issue about whether an “implied” vested right had been granted, if there was not even a need for a grant(as you and Ed claim) in the first place. BTW, I am not anti govt. employee: I believe they deserve reasonable pensions, or,local governments will go bankrupt by the hundreds and hundreds. Those in the trenches will be hurt the most. Cruel, very cruel.

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