San Jose Mayor Reed folds on pension initiative

In a disappointing indicator of the challenges facing public pension reform, outgoing San Jose Mayor Chuck Reed has shelved his statewide ballot initiative designed to address the problem.

The mayor blames a time crunch and unappealing language used in Attorney General Kamala Harris’ ballot summary, according to The San Jose Mercury News. Reed now hopes supporters will target 2016 for the proposed amendment, which would enable city officials across California to renegotiate pension contracts with public workers and retirees.

But opposition to Reed’s plan runs deep. In addition to a full-court press from organized labor, pension reform faces stubborn opposition from California’s courts. Unions argue that an economic recovery will make the state’s often preposterously exorbitant pension packages affordable again. Santa Clara Superior Court, however, has ruled that elected officials cannot alter contracts even on the narrow basis of future years of employment.

That’s not just bad news for California. The Brookings Institution, hardly a Republican bastion, recently hosted Reed, a Democrat, for an inside-the-beltway keynote presentation on the dire public pensions situation faced by municipalities across the country. Opening the event, Brookings’ Matt Chingos underscored what’s at stake: a $3 trillion public pensions shortfall nationwide.

As the Brookings presentation made clear, a hole that big cannot be plugged simply by shifting costs or restricting reform to new employees. Nor can cities bridge the gap by hacking away at budgetary line items that benefit all.

Vallejo, which went bankrupt in 2008, has owed that a return to bankruptcy isn’t an option. Yet that city’s attempt to meet budgetary requirements without touching pensions — thanks to CalPERS threats of costly legal action — led to a fiscal dead end. As CNN reported:

“Vallejo’s police and firefighters can retire at age 50 with as much as 90% of their salary — for life. Public safety workers who retired in the last five years have average annual pensions of more than $101,000. And the pension costs are expected to continue to rise, with a projected increase of up to 42% over the next five years.”

The result? Not only ballooning costs, but drastic cuts in city services, putting citizens at risk. Crime is up, roads are deteriorating, and residents are voting with their feet.

Plus, on the heels of these daunting details comes news that Moody’s expects San Bernardino and Stockton, both of which declared bankruptcy in 2012, to face the same dark future as Vallejo.

Momentum

As bad as the situation may seem, however, there’s some reason to expect a shift in momentum. The pensions debacle is sharply dividing Democrats.

That’s good news in a non-partisan sense because, if you need change on a major statewide issue, you need more support than the minority Republican Party alone can deliver.  And Democrats tend to support the status quo because it’s largely the result of their extended dominance of California politics.

On prison reform and other issues, Gov. Jerry Brown has risked the ire of some of his fellow Democrats. Despite the powerful influence of the union lobby, it’s now politically acceptable for members of any major California party to support contract renegotiations as the best path to pension reform.

All it would take now for dramatic change in that direction is a critical mass of support among officials. Once that support — even tacit support — outweighs the risk of union opposition, get ready for swift movement.

On a more bracing note, the continued collapse of cities’ fortunes will hasten change along. No degree of economic recovery can outpace and compensate for the harm coming to municipalities forced by cuts to basic services, multiple bankruptcies, and the flight of productive, law-abiding citizens from their jurisdictions. All it takes is a few shocking news stories — the kind that attract national media and political attention — to cast union arguments for luxurious pensions in a deeply unflattering light.

It’s sad to imagine that kind of pain is the price Californians have to pay for a brighter future. But if that’s what opponents of pension reform demand, that’s what they’ll get — along with the responsibility for such a misguided agenda.