Chuck Reed: Reform measure will bite pension liability ‘elephant’

Pension reformFormer San Jose Mayor Chuck Reed acknowledged at a recent taxpayer forum that his latest proposed pension reform initiatives won’t solve California’s $350 billion unfunded retirement benefit liability problem. But he thinks they’ll help.

“Sometimes you have to eat the elephant one bite at a time,” Reed told the Contra Costa Taxpayers Association at an Oct. 30 luncheon. “So these are bites out of this elephant that’s $350 billion big.”

Reed and former San Diego City Councilman Carl DeMaio have submitted two initiatives that would limit pension plan benefits for government employees hired after Dec. 31, 2018.

Third Time the Charm?

Reed and DeMaio are hoping the third time is the charm. Previous pension reform efforts last year and in June were canceled due to concerns about ballot descriptions by Attorney General Kamala Harris.

The first initiative, The Voter Empowerment Act of 2016, requires voter approval before governmental agencies can enroll new employees in pension plans and increase their pension benefits. Voters also must approve if an agency wants to pay more than half of the total cost of retirement benefits for new hires.

In addition, the initiative would prevent retirement boards from imposing fees or other punishments on governments that don’t allow new employees to participate in a pension plan. The California Public Employees Retirement System requires its member agencies to pay three-to-five times the cost of their unfunded liability in order to opt out of the system, according to Reed.

These changes are needed, according to the initiative, because “state and local governments face elimination or reduction of essential services because of costly, unsustainable retirement benefits granted to government employees. Almost all of these benefits were granted without the consent of voters.”

The other initiative, “The Government Pension Cap Act of 2016,” limits government contributions for new employees at 11 percent of base compensation; 13 percent for new safety employees. It also requires voter approval before an agency can pay more than half of the total cost of retirement benefits for new employees.

“We are trying to empower the voters,” said Reed. “Either of these two initiatives would have a significant impact on the cost of new employees.”

Those costs are increasing rapidly, according to Reed. In the next five years, state and local governments will need to increase contributions by 50 percent to CalPERS. This is resulting in less state funding for universities, courts, roads, social services, parks and recreation, Reed said.

Price of Pensions

School districts have it even worse. Their contributions to the California State Teachers Retirement System will more than double in five years.

“Where the money goes determines the priorities of the state,” Reed said. “And we are putting our money, I believe, into the wrong priorities.”

Failure to correct those priorities will result in more jurisdictions going bankrupt like Stockton, Vallejo and San Bernardino, he said.

“The people in those cities suffered; the employees working in those cities suffered,” he said. “And we need to avoid that. And so, giving local governments some things they can do to deal with their problems has been the focus of the initiatives.”

A successful pension reform initiative campaign will require $25 million, in addition to the $2-3 million for signature gathering, Reed said. He anticipates raising much of it from Silicon Valley executives wanting to avoid future tax hikes as well as from pension reform advocates around the country.

If they are successful, California will begin making a dent in its unfunded retirement benefits liability, he said.

“Although we acknowledge this will not solve the $350 billion problem,” he said, “if these initiatives were passed, we could save money on new employees that will allow us to help pay down that $350 billion of unfunded liabilities. This is not a solution to those unfunded liabilities, but it would be helpful.”

Potential Savings

The savings could be significant, according to a state Legislative Analyst’s Office analysis of Reed’s June initiative, which also was called the Voter Empowerment Act of 2016. It’s similar to the current VEA, but also allows voters to decide compensation for current employees.

“It is likely that [pension] benefits would be reduced or eliminated in many jurisdictions,” the LAO said. “These changes would reduce governmental employer costs significantly in the future.”

Critics of Initiatives Speak Out

Naturally, the public employee unions are opposed to benefit reductions for their current and future members. Three people handed out leaflets outside of the luncheon at Back Forty Texas BBQ in Pleasant Hill that were critical of Reed, DeMaio and their initiatives.

“These two former politicians are currently championing a State-wide initiative approach to destroy retirement security for all new employees that would chose [sic] to work in the public sector, including law enforcement, firefighters and teachers,” said Mike DeBord, a committee co-chairman of the California Retired County Employees Association, in an essay titled “Pension Reformers Continue Their Long List of Failures.”

In another piece, “Proponents Still Trying to Undermine Retirement Security,” DeBord said that the “initiatives would amend the state constitution and erode retirement security for public employees, targeting new hires. If any are approved by the voters, they would likely be subject to many costly and lengthy legal challenges.”

Vested Rights

But the luncheon’s other speaker, Contra Costa Times columnist Dan Borenstein, believes Reed’s initiatives don’t take a large enough bite out of the $350 billion elephant. He wants Reed to challenge state judicial rulings specifying that pension benefits for current employees can be increased but not decreased.

“It’s a one-way ratchet,” said Borenstein. “Someone likened it to a mouse trap.”

Pension reforms would not affect benefits that have already been accrued; only accrual rates for future work would be affected, he said. Borenstein said he’s aware of the political headwinds that an initiative challenging vested rights would face, but he asked Reed to take on that more substantial fight.

“Aside from politics, why not challenge the vested rights question?” Borenstein asked. “And if you don’t, how much are you really accomplishing?”

But given California’s political climate, Reed said the focus has been on getting an easily understandable and supportable initiative on the ballot.

“Something that’s hard to misconstrue,” Reed said. “Although this is a political campaign – truth is never really a limitation of any political campaign in California. So we know they’ll be misconstrued. But we want people to be able to pick it up and decide for themselves.”

The legislative analyst will begin a financial analysis of the initiatives probably on Nov. 9, according to Reed, with the attorney general filing titles and summaries by the end of the month.

After that, “we’ll do some polling, try to decide what to do,” said Reed. “And hopefully we’ll be in a position where we’ll actually have these in front of the voters in November of 2016.”

29 comments

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  1. Dork
    Dork 10 November, 2015, 07:02

    Put this on the ballot and it will win BIG:

    We the People do grant to ourselves Sovereign Immunity for ALL Unfunded Liabilities.

    Reply this comment
  2. Rex the Wonder Dog!
    Rex the Wonder Dog! 10 November, 2015, 12:21

    I have lost faith in Reed and DeMaio, just put it on the ballot already.

    IMO the SCOTUS ruling on striking down public union dues will be the cure for public union graft and fraud. And it is just around the corner.

    Reply this comment
    • Ted
      Ted 10 November, 2015, 14:07

      Bwahahahah lol
      omg bff Rexy Poodle!

      You’re a caution! Like anybody cares what you think??? You have been wrong about every single issue you have ever posted about out here– and NOW—– lol you are turning your back on the pension initiative!!!

      Oh man this is funny!

      You just can’t face facts yet little buddy? A promise is a promise relied on! We have laws little buddy!!! LOL

      DREAM big little buddy!!!!!!!!!!!!!!!!!

      Reply this comment
      • Rex the Wonder Dog!
        Rex the Wonder Dog! 11 November, 2015, 06:14

        I thought Teddy was banned here?? I predict a pay or pension cut in the near for trough feeder Teddy Steals 🙂

        Friedrichs et al, v. California Teachers Association, et al, U.S. Supreme Court, No. 14-915. Mark your calendars, the day Teddy Steals dies!

        Reply this comment
        • Ted
          Ted 13 November, 2015, 15:37

          LOL You thought I was banned? LMAO bwahahahahahaha

          you mean– you WISH I was banned little buddy! Because you have no answers for me– well….ever!

          Mark the date today ladies— looks like Poodle has made another one of her infamous predictions! Not one has EVER proven accurate!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

          LOL Oh my!

          Reply this comment
      • Dork
        Dork 11 November, 2015, 06:49

        We have laws little buddy!!! LOL

        Pretty Funny, but my LAWS of MATHEMATICS Trumps your silly Man-Made Law every day of the week. That which Can Not be paid, won’t. Simple 3rd grade math proves my point. There is NOT A SINGLE Public Employee Pension that is sustainable, they are ALL Mathematically Impossible to fulfill.

        Reply this comment
        • Rex the Wonder Dog!
          Rex the Wonder Dog! 11 November, 2015, 07:11

          Teddy Steals was never good at math!

          In fact, Teddy failed math from 3rd grade, when he ran out of fingers and toes to count on, up until he graduated his highest grade level, 7th grade 😉

          Reply this comment
        • Tough Love
          Tough Love 11 November, 2015, 08:55

          Well Stated !

          Reply this comment
        • Ted
          Ted 13 November, 2015, 15:39

          Cal Pers still about 300 BILLION little buddy! Any predictions on the bk date?

          LMAO——- you clowns have been trumpeting doom for years! Nothing EVER comes of it!!!!!!!!! LMAO

          Reply this comment
          • Rex the Wonder Dog!
            Rex the Wonder Dog! 15 November, 2015, 15:54

            LOL…Teddy had a MAJOR meltdown and spammed us. Where do I send my rent check for living inside your head Steals??

          • john moore
            john moore 15 November, 2015, 19:56

            To Ted: I just looked at the CaLPERS web site. It has about $290B in assets. The Present Day Value of Benefits promised is about $426B(a deficit of $136B). As of today, the Dow and S&P are about even(an added loss to be calculated at the year end of 7.5% X $426B.

      • Dyspeptic
        Dyspeptic 11 November, 2015, 13:18

        “A promise is a promise relied on!”
        Your favorite politicians break their promises all the time yet you don’t seem to care about that (see – “If you like your doctor you can keep your doctor, if you like your health care plan you can keep it”, etc., ad infinitum).

        “We have laws little buddy”
        Any law on the books is subject to being superseded by further legislation, popular referenda or court decisions (it’ called democracy), so quit blathering about the rule of law, for which your side doesn’t give a rats behind you damn fool hypocrite.

        Reply this comment
        • Ted
          Ted 13 November, 2015, 15:40

          Alas– Poor Dysphoric– I knew her well….

          I have responded to your nonsensical comments for years— so— I’ll just refer you to previous answers Madam !

          Reply this comment
      • Sean
        Sean 11 November, 2015, 15:18

        Ahhh yes, Mr. Bwahaha is back. I was wondering to myself the other day, “Whatever happened to that dopey guy that starts every message with ‘Bwahaha’?”

        Keep cheering for one hollow “victory” after another. You see, it doesn’t matter how many battles public unions win; in the end, math wins every time. There are no exceptions. EVERY bubble implodes. No exceptions. EVERY union that ever existed bankrupts the very entity they exist in. No exceptions. Going onto these blogs and leaving “bwahaha” comments will not create the money needed to pay for these fantasies. No exceptions. What should really scare you, if you were a thinking person, is that, even after a six year bull market, there still isn’t nearly enough money to pay for these fantasies. What should scare you, if you were a thinking person, is that laws have not, nor will they ever, create money where there is no money. What should scare you, if you were a thinking person, is that, once the entire public catches on to the extortion, your “laws” created by spineless politicians, will also be changed by the same spineless politicians you thought you could count on. Hmmmm. So, keep on cheering today, while all seems to be ok, but reality is coming soon.

        You just can’t face these facts yet, little buddy. Not to worry though. Reality is the best teacher of them all.

        Reply this comment
        • Ted
          Ted 13 November, 2015, 15:42

          300 Billion little buddy! LOL

          I’ll just watch that and let ya know when I’m worried little buddy!!!!!!!!!!!!!!!!!!!!!!!!!!!!Until then—- Bwahahahahahaha

          and

          Thanks for playing! You guys are easy to spin up!

          Reply this comment
    • Tough Love
      Tough Love 11 November, 2015, 08:53

      Hopefully you are correct … about the SCOTUS ruling.

      The CANCEROUS Public Sector Unions must be neutered.

      Reply this comment
      • Rex the Wonder Dog!
        Rex the Wonder Dog! 12 November, 2015, 15:45

        OMG Teddy just got destroyed!!!!!!!!!!!

        I wonder if he will come back and post again after that smack down!

        Reply this comment
        • ted
          ted 13 November, 2015, 15:43

          You seem particularly frustrated little buddy? Re-lax!!!!! It will all be ok!!!

          Reply this comment
  3. Ulysses Uhaul
    Ulysses Uhaul 10 November, 2015, 17:39

    Attention Graboids,

    Taxpayers responsible for pension shortfalls.

    What does it take to forget this non issue?

    Reply this comment
    • Tough Love
      Tough Love 11 November, 2015, 08:58

      Taxpayers should renege on these fraudulent underhanded deal-making between the Public Sector Unions and our Elected Officials whose favorable votes (on Public Sector pay, pensions, and benefits) are BOUGHT with Public Sector union Campaign contributions and election support.

      Reply this comment
  4. desmond
    desmond 10 November, 2015, 19:02

    My generation will fix. First we try to work with you.
    If alternative measures are needed genocide of recipients and beneficiaries are a common sense reform millennials will agree on.
    Once you run the numbers, it is a no brainer. Picking up little Timmy from soccer practice for the last time is part of the audacity of change. Where is grandpa? Let’s just say he has cashed his last check. Move along, you little f,, $$er.

    Reply this comment
  5. Rex the Wonder Dog!
    Rex the Wonder Dog! 11 November, 2015, 07:08

    Read the story, and weep my lil trough feeding sows;

    Supreme Court takes up major case on public sector union fees

    WASHINGTON | By Lawrence Hurley

    http://www.reuters.com/article/2015/06/30/us-usa-court-unions-idUSKCN0PA1PD20150630#ST0tLehKYiUH8cV7.97

    Reply this comment
  6. John Moore
    John Moore 11 November, 2015, 07:52

    Bornstein is right on this one, although he overstates the California rule. The Reed proposals would pass, but do nothing about unfunded deficits that will double every decade(7.5% income rate x current deficit, compounding). (See Joe Nation compilation)
    In my view, unless public agencies can elect a majority of pension reformers to its legislative bodies, the govt attorneys will continue to issue “license to steal” legal opinions(see Marin and Sonoma Co. responses to Grand Jury reports) and union dominated legislators will utilize the opinions to continue granting lottery -winner-like benefits. Again I refer to Marin and Sonoma county BOS and Pacific Grove and Oakland as examples. And when will CaLPERS, the governor, state legislators, local legislators, govt. attorneys and administrators begin to care one whit for the future of their children, grandchildren and the taxpayers?

    Reply this comment
  7. Fed Up
    Fed Up 12 November, 2015, 17:33

    STOP the pigs at the trough. As a down payment on this huge task, pass Reed’s initiatives!!!

    Reply this comment
  8. Fed Up
    Fed Up 12 November, 2015, 17:35

    John — Borenstein is certainly right as well. The vested-rights straitjacket must be broken through, by any means necessary.

    Reply this comment
  9. SkippingDog
    SkippingDog 14 November, 2015, 17:04

    Good job, Ted. The usual nutjobs really do get spun up when you call them on their nonsense. It’s like some kind of OCD illness they have about pensions, even though they know neither the law nor common sense will ever come down in their favor.

    Reply this comment

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