Dem Mayors tell Reed to drop pension reform initiative

27 Nov, 2013 by Katy Grimes

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Many can agree on the need for thoughtful and serious pension reform measures. Yet labor unions, and now Democratic mayors and city and county officials from around the state, have called on San Jose Mayor Chuck Reed to call off his initiative measure.

Reed, also a Democrat, has been a champion of pension reform. The unions and Mayors claim their retirement benefits and future security will be gutted should Reed’s measure be passed by California voters.

Maviglio’s fingerprints

In what appears to be a carefully orchestrated effort by Democratic strategist Steven Maviglio, whose name and phone number appear at the top, the letter claims Reed’s measure “would slash retirement security for millions of California’s teachers, firefighters, police officers, school employees and other public workers.” Maviglio also works as press secretary to Democratic Assembly Speaker John Perez.

Reed already has one pension reform win under his belt. He led the successful passage the San Jose’s Measure B pension reforms, and garnered 69 percent of the vote.

“The Pension Reform Act of 2014” would allow the state and local governments within California to reduce public employee’s pension benefits on a go-forward basis,” explained Adam Summers, a pension expert with Reason Foundation. “Under the measure, all benefits earned by existing employees up until the enactment of the measure, if passed, would be protected, but future, unearned benefits could be reduced.”

Pension reform measure would not endanger retirement plans

In a recent op ed in the San Jose Mercury News, Daniel Borenstein said opponents’ assertion that Reed’s measure would slash retirement security is “not true.”

“Anyone who cares about state and local government finances should take the time to understand what the measure would actually do,” Borenstein said. “It’s much-needed reform enabling government leaders to control the ballooning costs of public employee retirement programs.”

The Mayors

The mayors said “like most Californians, we believe pension matters are best decided locally at the bargaining table rather than the ballot box. Our cities have been successful in doing just that – as have the overwhelming majority of those in California.”

“According to the CalPERS, more than 386 jurisdictions have negotiated more than 538 changes to pension benefits, producing hundreds of millions in savings through higher employee contribution levels, reduced employer costs and reduced benefits,” the Mayors said. “We believe that engaging our public servants in constructive dialogue rather than political battles is a more effective way of achieving balancing budgets,” wrote the elected leaders.

Financially strapped governments need pension reforms

“Financially strapped government employers, often through collective bargaining, can reduce salaries, trim health care benefits, impose furlough days and even lay off workers,” Borenstein said. He explains:

Let’s be clear: The initiative would not affect current retirees. It also would not affect pension benefits that current workers have already earned. It would only allow changes to future pension accruals, making the rules similar to those for the private sector and most other states in the nation.”

To understand what’s at stake, remember that pensions are just one form of compensation. Each year that an employee stays on the job, he earns a salary, benefits like health care insurance and additional future pension income payable after retirement.

What’s at issue is the rate of that pension accrual. For example, a police officer might be promised a pension equal to 3 percent of final salary for every year worked. But what happens when the employer recognizes it cannot afford such a generous benefit?

A private-sector company would probably reduce the rate of future accruals. It might tell the worker that he can keep the 3 percent credit for each year he has already worked, but going forward he will only earn pension benefits at a rate of, say, 2 percent a year.

The mostly Democratic mayors, vice-mayors and city officials who signed the letter include:

Pete Aguilar (D-Redlands); Rusty Bailey (No Preference-Riverside); Connie Boardman (R-Huntington Beach); Aja Brown (D-Compton); Gary Davis (D-Elk Grove); Marie Gilmore (D-Alameda); Steve Hardy (D- Vacaville); Joe Krovoza (D-Davis); David Lim (D-San Mateo); Evan Low (D-Campbell); Gayle McLaughlin (D-Richmond); Andre Quintero (D-El Monte); Gina Papan (D-Millbrae); Jean Quan (D-Oakland); Jason Scott (R-Corona); Tony Spitaleri (D-Sunnyvale); Jim Wood (R-Oceanside); Vice Mayor Jim Wood (D-Healdsburg); and Vice Mayor Gilbert Wong (D-Cupertino).

San Francisco County Board of Supervisors President David Chiu and Sonoma County Supervisor Mike McGuire; City Council members Erin Carlstrom (D- Santa Rosa), Victor Gordo (D-Pasadena), Mark Johannasen (D-West Sacramento), Kevin McCarty (D-Sacramento), and Dan Wolk (D-Davis).

“Mayor Miguel Pulido (D-Santa Ana), one of the five mayors listed of a proponent of Mayor Reed’s measure when it was submitted, also has withdrawn his support,” the letter said.

The full text of Reed’s measure is HERE.