Pension Crisis

Mixed Results for Pension Reform Supporters in Midterms

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Gina Raimondo
Credit: Jim Jones

Candidates who have taken on the unions fared well in last night's elections. Initiatives related to reforming their pensions did not, however, do so well.

Rick Snyder of Michigan and Scott Walker of Wisconsin, both Republican, fended off challengers to earn additional terms as governors. Both have earned the ire of unions; Snyder for supporting right-to-work laws and Walker for stripping public sector employees of some collective bargaining powers. Walker already survived one recall effort from unions over his policies.

Possibly more important, though, is the victory by Democrat Gina Raimondo in Rhode Island. As treasurer, Raimondo hammered out significant public employee pension reforms, forcing them into solvency and shifting employees into hybrid plans to reduce the amount of potential debt obligations the state would take on. Polls then showed union workers rallying behind her Republican opponent, Allan Fung, 42 to 30 percent. She eked out a three-point victory, nevertheless. (Also of interest: a third-party candidate, Robert Healey of the Moderate Party, drew in 22 percent of the vote! Now that's how you spoil a race.)

On the flip side, a couple of public employee reforms on city ballots failed. In Phoenix, a ballot initiative to fight pension spiking and to force new city employees into 401(k)-style defined contribution plans failed (warning: autoplay video), losing 43 to 57 percent. Pension reform supporters had been applying a lot of pressure to getting the ballot measure passed (The Reason Foundation: which publishes this site and Reason magazine, produced reports analyzing the impacts of the initiative). Opponents of reform insisted that the initiative would have actually increased costs rather than reducing them. Given that pension reform has shown to be popular in polls in the much bluer state of California, it's possible that argument (despite being countered) may have played a role in the initiative's fate.

In a smaller loss, but a loss nevertheless, bankrupt San Bernardino, California, has failed to make changes to the charter so that the City Council can actually have some control over public employee salaries. San Bernardino is unusual in that the city's charter gives its leaders absolutely no control over public safety employee wages. Instead, their wages are determined by calculating an average based on the salaries of nearby similar-sized cities in California. Given that San Bernardino is extremely poor and many nearby cities used for these calculations are not, it means many city public safety employees are getting wages (and therefore pensions) in the six-figure ranges and well above what it's poor citizens can afford. Measure Q would have eliminated this part of the city's charter and allow the city to engage in collective bargaining with police and firefighter unions just like most other California cities. It didn't necessarily mean the employees would get pay cuts, but it gave the city the flexibility to try to actually negotiate for some. However, Measure Q failed, 45 to 55 percent. The city will continue to have to calculate salaries based on wages paid in nearby tony communities like Irvine even while in the middle of a bankruptcy reorganization.

If there is a message to take away from these results (hard since the initiatives are in no way connected to the candidates involved), it's that non-union voters are less likely to punish candidates for taking unions on, even when some candidates are on the left. But pension and reform-based ballot initiatives have a tougher fight because they are complicated, people don't necessarily grasp the long-term impacts, and they may not trust ideology-driven analysis. And if they don't grasp the outcome of a ballot initiative, they're probably likely to vote no.

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