Striking a deal

Losing police to other jurisdictions, Mayor Sam Liccardo faced “enormous pressure to reach a settlement,” according to Scott Herald at the San Jose Mercury News. In fact, wrote Herald, Liccardo “could legitimately argue that the city had achieved concessions in negotiations, obtaining savings he estimated at $1.7 billion over 30 years. San Jose was able to save millions by foregoing the so-called ‘bonus checks’ to employees. And the city and its public safety unions agreed on a cheaper health plan.”

In an unusual move, the City Council successfully petitioned the courts to invalidate the measure, paving the way for a renegotiated deal with law enforcement. Under the terms of the new wage agreement, the Mercury News reported, police officers will receive “8 percent in ongoing raises and 5 percent one-time bonuses.” But the fate of the deal remained in the hands of voters, who would have to approve the Measure B replacement at the ballot box in 2016.

For now, however, the city has at least managed to settle its three-year court battle with police and firefighter unions, as San Jose Inside observed. And it stanches its law enforcement losses, which were approaching crisis proportions. “Since 2012, SJPD has had 265 officers resign and 167 retire,” according to San Jose Inside. “This year alone, the department has seen 41 resignations and 54 retirements, leaving the agency with 943 sworn officers out of a budgeted 1,109 positions.”

Taking it statewide

But former Democratic Mayor Chuck Reed, along with former Republican San Diego City Councilman Carl DeMaio, continue to back a controversial ballot initiative that threatens to complicate the issue of pension costs by offering California voters a new statewide approach.

According to its authors, the matter is cut and dry: “This simple initiative gives voters the ability to stop sweetheart and unsustainable pension deals that politicians concoct behind closed doors with government union bosses,” the two said in a joint statement, according to the Sacramento Bee. “That’s why the politicians and union bosses oppose this initiative – and why they continue to try to mislead the public on what the initiative does.”

But Attorney General Kamala Harris, one of the targets of their criticism, emphasized its potentially destabilizing consequences in her office’s title and description of the initiative. According to that language, the initiative “eliminates constitutional protections” for collective bargaining, bringing “significant” savings, but also costs, for state and local government.

“In addition to allowing voters to weigh in on public employee compensation,” the Bee summarized, “the initiative would mandate that voters approve any increases in pension benefits, sign off on new state and local employees being enrolled in the ‘defined-benefit’ plans that are now commonplace, and OK governments covering more than half of retirement costs.”

Trusting the voters

For activist opponents of the Reed-DeMaio plan, however, Harris should have portrayed the measure in an even less flattering light. By any measure, the scheme raises the prospect of fewer pension programs. “Requiring a vote by each government body to continue letting new employees into pension programs could very likely fail,” Reason noted, “requiring the state and municipalities to switch to 401(k)-style defined contribution retirement funds instead (which don’t require a vote).”

“This switch is important for spending reform because it takes governments (and taxpayers) off the hook for a guaranteed return. Governments would be providing all their contributions at the front end and would not be obligated to make up for any below-expected returns from these funds like they would with a pension.”

Analysts have not yet determined how great a departure from the status quo future votes might entail. “The effects on collective bargaining could be dramatic,” wrote Orange County columnist Teri Sforza. “And due to the less-generous retirement benefits that would likely emerge, governments would face pressure to increase other elements of compensation to attract and retain workers.” Like other measures that have passed through California’s initiative process, this one would put Golden Staters’ appreciation for direct democracy to the test.

The LAPD hired the top-flight PR firm Burson-Marsteller to charm L.A. residents and their representatives, according to the Los Angeles Times:

“Next month, union and city negotiators are scheduled to meet with an independent mediator who will try to help the two sides reach a deal. The two sides have dug in, taking positions that seem irreconcilable: With the city still trying to recover from years of financial crisis, [L.A. Mayor Eric] Garcetti has said the city will not grant raises this year — a stance the police have rebuffed as unacceptable.”

Growing frustration

In the wake of several high-profile national instances of racially charged violence involving law enforcement, public opinion has shifted against police unions. On the left, prominent commentators including Bill Maher have decried their potential for abuses of power.

“This is why Americans hate unions now,” said Maher in a recent broadcast. “It’s why Republicans have been able to make ‘taking on the unions’ an applause line.”

On the right, meanwhile, libertarian analysts have portrayed police unions as no different from collective-bargaining organizations elsewhere in the public sector. Public unions and governments, wrote Reason’s Ed Krayewski, “are incentivized to cooperate to each other’s benefit, at the expense of taxpayers, who foot the bill for the contract goodies and later from any wrongdoing the contract demands is defended.”

At the same time, the LAPD’s halting efforts to rehabilitate its reputation among Angelenos have made modest but fragile gains. Its recent turn toward body camera coverage for cops on the beat has received cautiously optimistic reviews.

But a Times report last year, revealing expensive and endemic abuses of injury leave among L.A. cops and firefighters, epitomized the scope of the department’s credibility problem:

“City leaders across California say the very design of the injured-on-duty program, IOD for short, invites abuse. Because injury pay is exempt from both federal and state income taxes, public safety employees typically take home significantly more money when they’re not working. And time spent on leave counts toward pension benefits.”

Summing up the hurdles facing the force, attorney Merrick Bobb, a court-appointed monitor who oversaw the Sheriff’s Department, recently told WYPR the LAPD has gone “from being, in essence, an occupying army to being a community partner.”

But, in a twist that could add fuel to the political fire surrounding police unions, the new president of the LAPD’s union, Craig Lally, appeared on a notorious list of “problem officers” drawn up in the wake of the 1992 riots touched off by the Rodney King beating.

Political crosswinds

But for all its increased sense of community, the LAPD has appeared less willing to go with the flow of the negative mood surrounding any kind of public union. The cost and excess of public unions has now become a lead issue in California politics.

Gov. Jerry Brown has struggled to impose restraint on public employees, slamming the California Public Employees Retirement System for awarding higher pensions and the University of California Board of Regents for increasing tuition.

These conflicts are set to continue long into the new year. Republicans will continue to hit Democrats for being too permissive toward public unions. Democrats will keep casting Republicans as too accommodating toward police unions.

Meanwhile, violent crime in Los Angeles spiked last year by over 14 percent. From the standpoint of police, that’s reason enough for an increase in pay.

But from the standpoint of a growing number of Californians, unionized public employees are already too well compensated.

Even if the LAPD persuades Angelenos that it’s on their side, residents may well oppose swelling salaries, regardless of their party affiliation.

As the Los Angeles Times reported, “L.A. lawmakers voted in August to try to renegotiate the agreements. Now, the unions are stepping up pressure on City Atty. Mike Feuer to file a regulatory complaint alleging that the city was not fully informed of the risks of such deals.”

But in a confidential report sent to lawmakers, Feuer warned these allegations would be so “weak” that courts might even see them as “frivolous,” according to the Times. Caving in to union pressure, he concluded, “can only serve to sully the city’s reputation and credibility in financial circles.”

L.A.’s public pensions negotiations caused the squabble. Garcetti’s team wanted unions to accept pay freezes and higher worker contributions to health care costs. Unions countered that the city was ripped off by bank deals carrying interest rates that could have ended up lower if no deals were signed.

Activists have convinced themselves that an investigation would reveal that Wall Street knowingly bilked the city of L.A. But the city has rejected that idea for a lack of evidence.

The controversy has raised questions about Wall Street’s role in these and other pension struggles, which have become increasingly prominent around the country. Even if the big banks weren’t culpable in the L.A. deals, their related interest in keeping public pensions afloat has ignited a debate of its own.

The big picture

In years past, Wall Street benefited in certain ways from big, complex public pensions. Tuesday’s GOP landslide, however, has underscored the political benefits of opposing them. As big finance has begun to reconsider its position on public unions, the unions themselves have also soured on the relationship.

As CUNY professor Daniel DiSalvo recently explained, “[U]nions are more often allies than adversaries with investment firms and consultants. The unions want larger pensions. The money mangers want higher fees. Everyone benefits from more expensive pensions — except the current consumers of government services and future generations.”

In DiSalvo’s home state of New York, for instance, “pensions have become more expensive, the funds have increasingly invested in private equities and other risky asset classes in search of higher returns.”

The Empire State has hardly been alone in this regard, of course. The California Public Employees Retirement System made waves when it pulled $4 billion out of its hedge-fund investments. But the even bigger news was other pensions’ refusal to follow suit; even CalPERS retained its hedge fund managers, according to CNBC.

At the same time, private-sector unions have begun to diverge politically from their public-sector brethren.

Nationwide, public-sector unions have become closely associated with busted state budgets and municipal bankruptcy. But while public workers’ jobs have been sheltered, particularly in states like California, private-sector unionized workers have found themselves without the same level of political protection, especially from Democrats willing to staunchly defend public employees.

Losing Democratic voters

In the Wall Street Journal, Steven Malanga recently showed how that process has played out in traditionally Democrat-dominated states like Illinois, Wisconsin, New Jersey and Rhode Island. In Rhode Island, Democratic gubernatorial candidate Gina Raimondo had to run against public-union largesse to prevail in her close race — much to the consternation of grassroots liberals.

If the Journal could be taken as a guide, however, one recent editorial in the wake of Tuesday’s Republican landslide has revealed Wall Street’s current attitude toward public pensions: “The lesson we hope other politicians, Republicans and Democrats, take is that public-union money can be defeated when the cause is just and you stand your ground.”

Although California has not traditionally been thought of as a state hostile to public-sector employees, even the West Coast may shift along with the rest of the country. Rifts in big cities like Los Angeles, and Gov. Jerry Brown’s stated interest in reducing pension sweeteners, could signal bigger changes to come.