CA pension reformers push ballot measure

pension retirementThe struggle over reforming California’s public pension system has been taken up a new notch. Given the poor track record of past efforts to reform pensions on the statewide level, a bipartisan alliance of former municipal leaders, including ex-San Jose Mayor Chuck Reed and ex-San Diego councilman Carl DeMaio, has shifted its strategy away from regulatory conflict, toward the preferences of voters themselves.

A long road

“Reformers have backed statewide initiatives before,” as U-T San Diego columnist Steven Greenhut noted. “But titles and summaries issued by the attorney general have been criticized as biased. Voters who sign petitions tend only to read those short descriptions, so biased ones can be the death knell. Reformers even attempted a county-by-county approach, but the first test case, in Ventura County, was kept off the ballot by a judge.”

As the San Jose Mercury News noted, Reed and DeMaio both “led 2012 campaigns for local measures to trim city retirement plans whose soaring costs were devouring funds for city programs and services. Voters overwhelmingly approved San Jose’s Measure B and San Diego’s Proposition B that year. But government employee unions have leveled legal challenges to overturn them.” The experience inspired the team to introduce a measure that would simply “subject many pension enhancements to a vote of the people,” according to Greenhut. “It applies mostly to new hires — and to every local, regional or state government entity.”

Dramatic changes envisioned

But the simplicity of the approach would lead to potentially dramatic changes in the way California handles the existence of pensions, not just the creeping increases that have long been associated with them. “If the proposed ‘Voter Empowerment Act’ qualifies for the ballot and voters approve it in November 2016, cities across California would need voter approval to continue offering pensions beyond 2019. Otherwise, they would have to offer new employees 401(k)-style plans like those available from private employers,” according to the Mercury News.

In a remarkable provision, a second layer of protection would be added against reversion to the current system. “The initiative also would require voter approval for government employers to pay more than half of the total cost of retirement benefits,” the Mercury News continued. “And it would prohibit government officials from challenging any voter-approved state or local ballot measures regarding compensation and retirement benefits.”

Dueling trend lines

Although local government employment rolls have taken a substantial dip, in the high five figures, pension agreements have ensured that the cost of those employees has continued to rise. “Today, the main pension plans for state workers and teachers in California are about $190 billion short of what workers have been promised in benefits, despite the Dow Jones Industrial Average having nearly tripled in value since its March 2009 nadir,” the Weekly Standard observed.

“The cost of government has not declined, nor have continuing budget imbalances made cities, counties, and school districts any more efficient. Rising pension expenditures have left taxpayers in the position of having to, in effect, pay more for past government services while getting less and less in the way of current services.”

Especially in recent years, the tab has grown daunting for many cities. “Pension contributions are among the heaviest costs shouldered by California municipalities,” the Wall Street Journal reported. “California cities are expected to make a total of $5.1 billion in contributions during fiscal 2015, accounting for nearly 7 percent of total revenue, according to the California Policy Center, which analyzed 459 municipalities. Higher contributions often mean cash-strapped cities are forced to cut services or raise taxes to cover the bill.”

The fiscal problems created by pensions have focused national attention around the Voter Empowerment Act, which poses a particularly sharp challenge to certain California unions. “CalPERS relies on contributions from governments to fund worker pensions, and it has argued those retirement benefits are guaranteed by California law and can’t be cut,” the Journal noted.

39 comments

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  1. Ronald Stein
    Ronald Stein 25 June, 2015, 06:04

    The international business world is intelligent enough to know that defined benefits are financial disasters to any business, thus all businesses focus on the known, i.e., defined CONTRIBUTIONS alone. When public sector contracts are negotiated by public sector employees that hammer out a contract with defined benefits that forces under duress a third party, the taxpayers, to cough up the necessary dough, then it’s truly a case of the inmates running the Asylum. Any challenges to that “racket” would be heard before judges who have pension and benefit package they want to protect. Again, seems like a racketeering cover-up right before our public eyes.

    Legally, we may be obligated to pay those DEFINED benefit pension plans, but their unsustainability is killing the budget and discouraging new job creation as the entrepreneurs’’ taxes and fees are contributing to paying for those defined entitlements that are not available in the private sector.

    “Defined benefit” programs are lucrative to the recipients, but unsustainable as they are funded by investments that do not get defined rates of returns. Currently there are more than 12,000 people receiving pensions over $100,000 from CALPERS. When the CALPERS investments perform poorly, the consumer picks up the tab for those defined guaranteed pensions.

    Reply this comment
    • Charles
      Charles 25 June, 2015, 10:43

      So when government pensions are sunk to defined contributions which don’t pay and everyone is eating dog food what do you do?

      Reply this comment
      • Rex the Wonder Dog!
        Rex the Wonder Dog! 25 June, 2015, 13:06

        The sky is falling, THE SKY IS FALLING 😉

        Reply this comment
      • ThinkingOutLoud
        ThinkingOutLoud 25 June, 2015, 20:08

        We all get to sit around the campfire and tell stories about the good old days when most government union retirees were in the top 10% of income earners in the state, the vast majority of them making far more in retirement than the entrepreneurs who payed their taxes and their pensions made while working. Enjoy the dog food.

        Reply this comment
  2. Ulysses Uhaul
    Ulysses Uhaul 25 June, 2015, 07:48

    Why does everyone who stays in California have to take Course: Dumpster Diving 201?

    Reply this comment
  3. SeeSaw
    SeeSaw 25 June, 2015, 11:41

    There is a section on the Attorney General’s site for accepting voter comments on this proposed initiative. The forum will be open until July 5. Please log on and give your opinion about this ridiculous initiative! It must be stopped before it ever gets into circulation. If the people think they are spending money now, they won’t be around to know what hit them when the litigation begins–and goes on for years.

    Reply this comment
  4. SeeSaw
    SeeSaw 25 June, 2015, 11:47

    Ronald Stein, there may be 12,000 people getting over $100K, but there are 500,000+ getting less. The average is about $2500/mo. Did anybody ever tell you that life is fair?

    Reply this comment
    • Donkey
      Donkey 25 June, 2015, 13:01

      SeeSaw, I realize you have no empathy for the private sector taxpayer, because you sound exactly like every RAGWUS feeder I talk to, and you are no different than the Malkin’s, Madoff’s, or Enron types. You stole all you could, while you could, just like the rest of the thieving feeders, you and the rest forgot to do the math. 🙂

      Reply this comment
      • Rex the Wonder Dog!
        Rex the Wonder Dog! 25 June, 2015, 13:09

        Stop picking on seesaw Donk, she has early onset dementia 🙂

        We should all pitch in to send her poor hubby on an all expenses paid vacation for what he endures 24/7/365!

        Reply this comment
      • SeeSaw
        SeeSaw 25 June, 2015, 17:19

        You are ridiculous! Nobody would ever believe that you are a UCLA grad! For gods sakes, I am married to a private-sector taxpayer and all of my family members are private-sector taxpayers. I have never stolen anything in my life! If all you can do is slander, why bother to get on here! You have nothing to say except personal insults–as if that will heal your black heart!

        Reply this comment
    • DavidfromLosGatos
      DavidfromLosGatos 25 June, 2015, 16:32

      Absolutely true that vast majority of the pensions are under $100K. But, this is because a sizeable percentage of the pensions are going to people that did not put in a full career at the public trough, e.g. less than at least 30 years, and often less than 20 years. In fact, you can “earn” a pension of some amount just by working as little as 5 years. And, of course, the bulk of the pensions were awarded for jobs that paid a lot less than $100K.

      The amount of the individual pensions depending on the individual employee is not the issue (at least, not to me). It is the fact that they are not adequately funded at the time they are awarded. Government employees and politicians award themselves generous pensions,but do not pay for them, and instead stick the future generations with the tab.

      Reply this comment
      • SeeSaw
        SeeSaw 25 June, 2015, 17:25

        So, what is your point? The average service credit for miscellaneous annuitants is 20 years. Yes, I know a few of those workers who have pensions for as little as five years–the pension amount is less than $500/mo. What does it matter what percentage of workers are included in the average? Every one on them is a factor in the calculation of that average.

        Reply this comment
        • bob
          bob 26 June, 2015, 20:53

          And there those getting 109% of their highest year’s salary for the rest of their lives plus medical. And do pay for it all they will work Desmond and his generation to death. And then they will dance on poor Desmond’s grave.

          Reply this comment
  5. CommonSenseIsNotCommon
    CommonSenseIsNotCommon 25 June, 2015, 12:27

    Something must be done with these pension plans because governments are shriveling on their weight. In all fairness, those that have accumulated what they have earned should not have that taken away from them. Those that are already retired should continue to benefit from those commitments that they had earned and expected to rely on in their future. However, the focus has been on new employees which should be given the 401K approach only as their retirement benefits. Those already in the system, should have their current systems capped and stopped, with those plans to be transformed into a 401K approach from that point going forward. They would have a split retirement where they can tap from the pension plan at the tapped rate of what they have accumulated those far as well as the new 401K funds they would contribute into the future going forth. I would expect to see a phase over date of 1 year before the capping would take effect. They can then decide to continue their employment or pursue another path. It will always be controversial argument no matter what is proposed, but you have to phase it in at one point before you start to see a steady stream of governmental agencies visiting the bankruptcy court. Status quo is not an option!!

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    • SeeSaw
      SeeSaw 25 June, 2015, 17:30

      If you do that, you begin the transition to end DB pension systems. Your descendants will remember you for that! Who gets by on just one source of income after they retire? We had 457 plans in the public-sector and we saved in them just like you with your 401k. I’m sure you are aware that it will take a couple million dollars in that 401k to take you through the rest of your life.

      Reply this comment
      • Donkey
        Donkey 28 June, 2015, 09:14

        My sweet SeeSaw, you endeavored to get yours, but care none for the private taxpayers that pay for your ill gotten gains. The future taxpayers will celebrate the day that BD plans for government RAGWUS feeders were ended, and we returned to a math based, logical form of thinking. 🙂

        Reply this comment
  6. Elmo
    Elmo 25 June, 2015, 14:45

    Ronald Stein said it perfectly. I AM a municipal pension recipient but I understand basic economics and politics. Unions contribute to city officials campaigns, then said officials are constantly beholden to them and dole out an endless amount of benefits at contract negotiation time. The taxpayer is NOT in the loop. I KNOW what I am talking about. I was a (forced) member of the corrupt SEIU union! I like CommonSence’s idea though!

    Reply this comment
    • SeeSaw
      SeeSaw 25 June, 2015, 17:44

      I was a union member too–my dues were never as much as $15/mo. The taxpayer is in the loop because he/she has elected representatives making decisions. And every contract is on the Agenda five days before the Council meeting. Its easy to blame someone else for your lack of attention. The unions can make donations to the candidates of their choice or the billionaires can run the table on their own. If you prefer the latter, that is your choice too.

      Reply this comment
  7. californianative
    californianative 25 June, 2015, 19:26

    Oh boy, where to start on this one. My employer ( private, non profit healthcare) just froze our defined benefit retirement plan. The employees that are hurt the most are the ones ( like me) that are 10 years out from retirement. The young folks that have 30 years to save in 403b ( same as 401k) and defer income in 457 plans ( a deferred income plan for high income earners/executives and by my understanding NOT guaranteed unless you work for a governmental entity) will be OK. I have been maximizing my contribution to the above as well as some diversification in residential and farm real estate so will be OK. BUT… we may not do as well ( between the wife and I three graduate degrees, two at the doctoral level) in retirement as my recently deceased father in law who retired from the City of San Jose years ago. At the time he retired ( around 1990) he was making $ 60,000/ yr in retirement income plus lifetime paid medical benefits. The wife and I were not even making that combined in 1990 with two advanced degrees. He was a High School graduate. His 3rd wife is now receiving about two thirds of his income ( about $ 40,000/year) in survivor’s benefits. She is in her mid 60’s ( he died in his late 70’s) and the City of San Jose will be on the hook for her for probably another 20 years. We are happy for her, but do really wonder how this is sustainable long term. We will most likely not have as comfortable of a retirement as they had with much more education and ” higher powered” careers than they ever had. They were beneficiaries of the post WW II American affluence. Those days are over but unfortunately until the current cohort of pensioners and their spouses pass on the collective taxpayers throughout the country will be on the hook for this largesse in the form of higher taxes, poorer services and substandard schools.

    Reply this comment
  8. californianative
    californianative 25 June, 2015, 19:31

    If you do the math, my father in law retired in his early 50’s. He actually retired at 50 with 30 years service but had so much accumulated sick time it took him around two years to ” work off” the sick leave before he actually retired. I think he still got a chunk of change when he was paid out for the rest. My current contract does not allow for any sick leave or vacation. I get paid for hours worked.

    Reply this comment
  9. Ulysses Uhaul
    Ulysses Uhaul 26 June, 2015, 09:56

    Posters,

    Seesaw is a salt of the earth decent Californian who played by the rules contributing to the common good.

    She deserves her pension.

    She deserves respect not recrimination for defending the average public employee retiree.

    In fact, she exudes common sense in a rapidly changing social/culuture /economic enviroment where many residents are threatened and challenged to cope….

    Donkey…..have at it…..

    Reply this comment
    • S Moderation Douglas
      S Moderation Douglas 26 June, 2015, 11:25

      Ulysses,

      Agreed. Thank you.

      Reply this comment
    • Donkey
      Donkey 28 June, 2015, 09:24

      Ahaul, like you, SeeSaw has taken every advantage of the private sector taxpayer and burned into her mind that she “deserves” every penny the RAGWUS has stolen for her.
      Liberty isn’t the freedom to do or say, or steal whatever you want. That is Licentiousness. Liberty is the freedom to do only the good for yourself and others. Licentiousness is the freedom to do that which is evil to yourself and others. That is why we have laws lest we become a lawless society. But our laws making ways have been corrupted by the RAGWUS and its feeders. Our constitution wasn’t written to guarantee licentiousness but liberty. Free speech wasn’t written to guarantee people freedom to use all manor of profanity, vulgarity or violence. It was written to guarantee people the freedom to voice their opinion. For the sake of tolerance and a fear of being judgmental, we have blinded ourselves to the fact that there is good and there is evil and have become a nation of licentiousness instead of a nation of liberty. Of course I am only writing about the RAGWUS segment of our nation and state, which has ensnared the political process with their Quid Pro Quo scam politicians.
      The reality is that simple math will bring it all down. 🙂

      Licentiousness defined: Excessive freedom; lack of restraint

      Reply this comment
  10. bob
    bob 26 June, 2015, 20:59

    No new hires in the private sector get penisions any more and the vast majority of pensions in the private sector are gone or scaled way back.

    If the private sector can no longer afford pensions how on earth can pensions be viable in the public sector?

    After all, it is the private sector that funds the public sector.

    Reply this comment
    • Queeg
      Queeg 26 June, 2015, 21:45

      Comrade Bob,

      Yep rip off public servants. Finish all types of workers. Feel better watching your felow humans living in third world poverty!

      Reply this comment
    • NTHEOC
      NTHEOC 27 June, 2015, 09:54

      The more important question you should be asking Bob is why are pensions disappearing in the private sector?? Every worker deserves a pension whether its private sector or public! Dont be blinded by your pension envy.

      Reply this comment
      • Donkey
        Donkey 28 June, 2015, 09:30

        No one expects you to answer your own question ntheoc!!
        I will give you a pointer my gray matter challenged RAGWUS feeder. The cost of the RAGWUS and all its feeders has driven most profit out of doing business out of the private sector in most cities and counties of California. By living in your RAGWUS world one can understand your ignorance. 🙂

        Reply this comment
  11. desmond
    desmond 27 June, 2015, 04:08

    Brave New world. Driver free cars, electronic signals sent remotely to stop the heartbeat of a entitled, arrogant, senile pension hog. It is a beautiful green thing to reduce waste.

    Reply this comment
  12. Teddy
    Teddy 27 June, 2015, 21:36

    Of course it will NEVER become law for OH so many reasons— but

    if it did—- LOL— it would cost WE taxpayers so much more in contributions as the new going forward employees under the new reforms whould stop paying in! LMAO— the drafters of this new loser of course present ZERO actuarial data supporting sustainability! LOL

    Duncey and Noodle the Poodle in 3,2.1……Zzzzzzzzzzzzzz

    Reply this comment
  13. desmond
    desmond 28 June, 2015, 18:51

    To the most hated generation: We will save our money, any idiot who thinks he deserves a pension paid by others will be fertilizer in the brave New world. Euthanasia is great. We don t need you

    Reply this comment
  14. desmond
    desmond 29 June, 2015, 18:10

    Kooky idea to pay for your own retirement. Once you are worm food, the fun will begin …..cleanse the most hated generation through technology. Brave New world, but a greener one. Climatologists will buy into it.

    Reply this comment

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