Pension reformer files 3 state initiatives

JULY 13, 2011

Editor’s Note: The following is a statement from the California Center for Public Policy regarding three initiatives it filed with the state attorney general on Tuesday:

The California Center for Public Policy submitted three initiatives for titles and summaries to the California Attorney General yesterday to: 1) eliminate public sector collective bargaining in California, 2) institute a progressive income tax on public sector pensions above $100,000 per year, and 3) reform public sector pensions, including retirement ages for existing public sector employees.
According to Dr. Lanny Ebenstein, president of the center: “Public sector unions and their compensation are the root of the financial crisis that plagues almost every government agency in the state. It is time to end public sector collective bargaining. To end public sector collective bargaining is the right approach to maintain vital public services while not raising general taxes.”
The California Center for Public Policy is a Santa Barbara-based policy and research organization that issued a report last year, “Reforming Public Employee Compensation and Pensions” (October 6, 2010), that supported reform efforts on the November 2010 ballot seeking to change public sector compensation, particularly in the area of pensions. Earlier this year, the center said it would submit an initiative to end public sector collective bargaining in the state.
“Raising taxes and cutting services is the wrong approach to California’s permanent government budget crisis. The right approach is to pay public sector employees fair wages and benefits, particularly pensions,” he said.  “Whether the standard is salaries, benefits, working conditions, or especially pensions, hundreds of thousands of California government workers have total compensation that dwarves their counterparts in the private sector. Ending public sector collective bargaining is a necessary step to putting California’s fiscal house in order. The power of public sector unions over government spending and in other areas is much too great.”
The second of the three initiatives that the center will submit would institute a progressive income tax on CalPERS and CalSTRS annual pensions between $100,000 and $150,000 of 15 percent above the standard state income tax rate, and of 25 percent on annual pensions above $150,000.
According to Ebenstein: “In addition to prohibiting public sector collective bargaining, public sector pensions above $100,000 per year should be taxed more. There are already more than 14,000 CalPERS and CalSTRS beneficiaries who receive $100,000 per year or more in pensions. This number will increase dramatically in the years ahead. A progressive income tax should be instituted on California state and local public sector pensions of $100,000 a year and more. In time, this would generate more than $1 billion per year for the state.  It is not appropriate to raise or maintain regressive taxes like the sales and car tax, or to limit the dependent tax credit. Rather, high public sector pensions should be taxed on a progressive basis.”
In another 12 years, approximately 100,000 retired California public sector employees are projected to receive pensions of $100,000 per year or more.  “It doesn’t make sense for public sector employees retiring at as young as age 50 to receive pensions of $100,000 per year or more as programs for children, the elderly, the infirm, the poor, the homeless and the environment are eliminated,” Ebenstein said. “The state’s fiscal crisis will not be solved merely through changing the retirement benefits of new public sector employees or even the future retirement benefits of existing public sector employees. Rather, the pensions of existing public sector retirees receiving $100,000 per year or more should be reduced. The progressive course is to tax public sector pensions above $100,000 per year more.”
Robert Feckner, long-time president of the California Public Employees’ Retirement System, has, independently, said: “I think when you’re looking at the $100,000 club, it’s something that needs to be looked at. I don’t think the fund was set up to look at someone retiring with that kind of benefit” (Sacramento Bee [11/23/09]).
The third of the three initiatives the center will submit would raise the retirement age of government workers to 65, with the exception of sworn public safety officers, who would be able to retire at age 58.
“The fundamental problem and inequity in public sector compensation is that public employees can retire at a younger age than everyone else,” according to Ebenstein. “There is no reason that public sector employees should not work as many years as everyone else, except public safety officers. However, even in the case of public safety, retirement at as young as age 50 is too early.
“There is an alternative to continually raising general taxes and slashing vital public services. This is to pay public sector employees fair wages and compensation, especially pensions. This would allow existing general taxes and public services to be maintained.”
The proposed amendments to the California state constitution follow.
Proposed amendments to the California state constitution:
1) Article 14, Section 6. Prohibition of Public Sector Collective Bargaining
No state, county, municipal, or like government officer, agent, or governing body is vested with or possesses any authority to recognize any labor union or other employee association as a bargaining agent of any public officers or employees, or to bargain collectively or to enter into any collective bargaining contract, memorandum of understanding or other agreements with any such union or association or its agents with respect to any matter relating to public officers or employees or their employment or service.
2) Article 13, Section 36. Income Tax on Public Sector Pensions Above $100,000 Per Year
A state income tax of 15 percent above the standard state income tax rate is hereby instituted on all public sector pensions paid by the California Public Employees’ Retirement System and the California State Teachers’ Retirement System on annual pension income from these sources, exclusive of health benefits and health insurance, between $100,000 and $149,999; and of 25 percent above the standard state income tax rate on all public sector pensions paid by the California Public Employees’ Retirement System and California State Teachers’ Retirement System on annual pension income from these sources, exclusive of health benefits and health insurance, above $150,000.
3) Article 7, Section 12. Retirement Ages of Public Sector Employees
No new memorandum of understanding or other contract or agreement between any public agency and public sector employees utilizing the California Public Employees’ Retirement System and California State Teachers’ Retirement System may allow retirement of employees with full retirement benefits at an age younger than 65, with the exception of sworn public safety officers, who may receive full retirement benefits starting at age 58.
“Government does not exist to provide compensation and pensions for government workers,” Ebenstein said. “Government exists to provide good public services at a reasonable cost.”
Lanny Ebenstein is the author of the first two biographies of the Nobel Prize-winning free market economists Friedrich Hayek and Milton Friedman. Dr. Ebenstein is a lecturer in the Department of Economics at the University of California, Santa Barbara, and served as a member and president of the Santa Barbara Board of Education.  He received his Ph.D. from the London School of Economics.  

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  1. steve
    steve 14 July, 2011, 08:24

    concidering the affirmative action program that had passed several years ago,and the enflux of minority[at that time] regard to employment,it has been my understanding that,with the progress this land mark decision,has made,,has in my opinion been attacked by nepotisim imagined by the conquering few of the good ol boy system at that time[white control]
    Now if a survey was made publicly of how many employees who work for govt ,agencies are related to one another ,,it would show the strangle hold of gain full fair ability employment hireing ,is inconsistent with THE AFFIRMATIVE ACTIONS BIRTH,,AND IN MY OPINION BE HALTED ,,AND RUN THROUGH A STRAINER OF ILLEAGLE ACTIVITIES IN ALL AGENCIES,,THIS IS MY OPINION AND OBSERVATION,AFTER WORKING FOR A PUBLIC ENTITY

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  2. JBD
    JBD 14 July, 2011, 09:29

    When can I vote for this?

    Sadly it’ll lose in the state Supreme Court if not sooner. But I’d love to cast my vote in favor of it.


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  3. Concerned
    Concerned 14 July, 2011, 10:31

    Working within emergency services (fire service), asking our suppression personnel to work until 58 is absurd. The amount of wear and tear that is put on the physical body in the line of duty for fire personnel is extreme. Raising the retirement age will only increase the number of disability and worker’s compensation claims because the injuries will surely increase with the increase in retirement age. It is a very physical job being a firefighter and asking someone to throw a ladder or pull hose at 58 or older is unrealistic.

    Additionally, I have no problem with an increase in the retirement age for all other personnel, but what I do have a problem with is cutting my pension when I am not able to receive the salary or merit increases that a private sector employee can receive. Regardless of my annual review, my increase, if I’m even scheduled for one, isn’t reflective how hard I’m working and the high marks I’m receiving from my employer.

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  4. Joe
    Joe 14 July, 2011, 12:41

    to concerned-you have laid out all the reasons that this proposed amendment to the California Constution should be enacted at this time. 1) There are hundereds of job in the private sector that require daily (not just when a fire occures) more physical effort than a firefighters job. These positions don’t let people sit around fire stations or go jogging during working hours. the greate majority of these people will never be paid the starting salary of a firefighter leave along the ability to retire 20 years before the private sector on a FAT pension. They will be lucky if they have a pension by the time they retire at age 67. I’ve been a volunteer firefighter for 52 years now mostly forest fires. This is my last year I’m 76 the most I’ve ever been paid is expenses. Go cry in your beer

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  5. David from Oceanside
    David from Oceanside 17 July, 2011, 07:44

    All public employees receive excess pay and benefits but none more than firefighters. If concerned believes firefighters deserve their lavish benefits and more then lets privatize fire services. Let the market quickly determine if he is right or he is wrong.

    Voting for these measures will be a pleasure. Listening to the long string of lies from the unions prior to the vote will be painful.

    Reply this comment
  6. StevefromSacto
    StevefromSacto 18 July, 2011, 17:01

    This just in:

    Calif. pension funds grow more than 20 percent

    Associated Press
    Published: Monday, Jul. 18, 2011 – 3:10 pm
    Last Modified: Monday, Jul. 18, 2011 – 4:05 pm

    SACRAMENTO, Calif. — California’s two largest public pension funds posted their highest investment returns since before the recession, with each reporting returns of more than 20 percent for the fiscal year ended June 30, the investment teams announced Monday.

    The top-drawer returns gave new ammunition to pension supporters against calls by critics for sweeping pension reform at the state Capitol or through the ballot box.

    Public pension costs have drawn political pressure and efforts to drastically revise the system at the Capitol or at the polls. Public employees have been pushing back, arguing that pensions can be fixed with relatively minor changes to curtail abuses and that the recession’s effects would dwindle over time.

    Retirement benefits are paid from investment returns and from contributions made by workers and the governments that employ them. Every dollar generated through investments is a dollar that doesn’t have to come from one of those other sources.

    The California Public Employees’ Retirement System, the nation’s biggest public pension fund, reported a one-year return of 20.7 percent, with gains in nearly every investment category.

    That preliminary figure was the best after-fees return in 14 years for CalPERS, which oversees benefits for 1.6 million current and retired state and local government employees and their families.

    It’s also the second consecutive year CalPERS topped the 7.75 percent investment return target assumed in its long-range financial model.

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