Pension Crisis

Calif. Public Pension Initiative Cleared for Signature-Gathering

Will voters rein in public employees?

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Definitely a bear market for pensions
Credit: neeravbhatt / Foter.com / CC BY-NC-SA

California Attorney General Kamala Harris has produced her title and summary for a ballot initiative that would change the state's constitution to permit municipalities to make changes to future pension and health benefits for its workers. Of course, they should be able to do so now, but it only works one way. They can only be increased. This ballot initiative, introduced by San Jose Mayor Chuck Reed (a Democrat), would allow fiscally struggling municipalities to reduce future benefits or require employees to contribute more moving forward.

The Sacramento Bee notes that neither side is exactly happy with how Harris has summarized the amendment:

The initiative is now officially titled "Public Employees Pension and Retiree Healthcare Benefits Initiative Constitutional Amendment." Harris' summary says, among other things, that it "eliminates constitutional protections for vested pension and retiree healthcare benefits for current public employees, including teachers, nurses, and peace officers, for future work performed."

Chuck Reed, the Democratic mayor of San Jose behind the measure, has said he wants to give state and local governments the authority to cut pension costs even if it means changing future benefits for current workers. He said he thought the newly released language isn't clear and that the word "eliminate" is "pejorative."

"You read this and you don't know what we're trying to do," Reed said. He said the summary focuses on the measure's pension takeaways when it should state that the initiative it also locks in accrued benefits.

Harris' summary is here (pdf). The law requires the summary to be 100 words or less. Given the complicated nature of pensions, it is a bit challenging to write a satisfying summary of what pension reforms would do. The latest draft of the full ballot initiative is here (pdf). Reed is correct that Harris' summary doesn't outright say that current benefits are protected from cuts by this amendment, though she does make it clear that changes refer to "future work."

The unions, of course, feel like Harris' summary doesn't shed a bad enough light on pension reform:

Organized labor said the language doesn't emphasize the risk they believe the measure poses to the retirement security of both current and future public workers. The unions also wanted Harris to cast the proposal as sanctioning the abrogation of contracts, since pension and benefits health are normally negotiated.

"While the title and summary describes the repeal of Constitutionally vested rights to pensions and retiree health care, teachers, nurses, and firefighters – by far the largest groups of municipal public employees – deserve to have voters know exactly how their retirement security will be put at risk with this measure," the union coalition's press release said.

How does the risk compare to what could happen to their retirement security if their employers go bankrupt, hmm?

The release of the summary now allows the initiative to be circulated for signatures, so we may see where the public's loyalties lie. In California, voters passed pension reforms in San Diego and Reed's own San Jose in 2012. A judge ruled in December, though, that pensions couldn't be cut in San Jose, hence the need for a constitutional amendment. A Reason-Rupe poll in September shows that citizens want their cities to deal with financial problems by reducing city employee benefits and pushing them into 401(k)-style defined contribution programs.