Pension reformer files 3 state initiatives

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.

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.

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.

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.”