Voters face pension-reform decisions

In a series of contests playing out at the state and local levels, Golden State voters will cast votes this November that could reshape the pension landscape for years to come.

Races have attracted attention for offices that exercise direct influence over the institutions that set pension policy. Cities and municipalities, meanwhile, have taken this election year as an opportunity to change laws placing restrictions on their ability to renegotiate certain pension contracts.

Rising GOP star Ashley Swearengin has wound up at the center of the statewide controversy over pension policy. As the mayor of Fresno, she shielded her city from bankruptcy — by braving the kinds of reductions in city staff and services that raise alarms among defenders of unchanged public pension plans. Instead of throwing Fresno into chaos, however, Swearengin’s moves traded short-term pain for longer-term stability, including a balanced budget for the current fiscal year.

The experience lent Swearengin credibility in her candidacy for the state controller’s office. She is running against Democrat Betty Yee, a member of the state Board of Equalization.

Hopes

That has buoyed Republican hopes for a high-profile win this election season. But a Swearengin win could have a substantial impact on policy, not just politics.

Although the controller typically has been seen as an official with oversight over California’s balance sheet, the position includes another responsibility with increased significance: a seat on “dozens of boards that oversee public pensions,” as the Bakersfield Californian recently stressed. “Swearengin says as controller, she would advocate for reducing the state’s long-term liabilities, roughly $300 billion by official estimates, and for improving the business climate with an annual ‘competitiveness audit.'”

The issue of pension oversight was sharpened recently when Gov. Jerry Brown ordered the incumbent controller, John Chiang, to launch an inquiry into how to prevent future instances of “pension spiking.” That’s a practice where union members game the benefits system in order to maximize eligible work hours that count when calculating pension sizes.

Chiang’s office had failed to detect pension spiking earlier in the year, leading the California Public Employees Retirement System to deny it had done anything wrong. Now running for state treasurer, Chiang’s campaign has touted his efforts to bring pensions to heel. His Republican opponent, Greg Conlon, also has outlined a pension-reform plan.

Showdown in San Jose

At the municipal level, voters themselves now have a chance to impact pension policy. On this front, San Jose has emerged as the ground zero of high-stakes initiatives.

Measure G has attracted attention as a model for what a California city can do to renegotiate pension contracts without running afoul of the state’s embattled but stubborn interpretive framework shielding those contracts by law. Supported by outgoing Democratic Mayor Chuck Reed, Measure G would reform San Jose’s two pension boards by enabling them to hire their own executives — presumably cutting down on patronage appointments and insider dealing.

Although Reed has developed a reputation among union supporters as a “nemesis,” the San Jose Mercury News explained Measure G also has the backing of the San Jose City Council.

Meanwhile, re-entering the debate is Measure B, a pension reform city voters passed in 2012. If Reed and his allies fail to ensure that pension-reform candidates secure office in November, Reed’s opponents, including labor-supported mayoral candidate Dave Cortese, likely would settle union suits against Measure B.

Unions alleged Measure B skirted California’s pension-shielding approach in a way that threatened the basic public safety of San Jose. In echoes of the debate that swirled around Ashley Swearengin’s efforts to evade Fresno bankruptcy, unions maintained pension cuts caused San Jose’s cash-strapped police force to plummet from 1,400 street-ready officers to 900.

With the election just three weeks away, pension reform is the issue that, even when not immediately noticed, is the part of the iceberg under the surface of state and municipal finance.