Pension Crisis

California Pension Reformers Split Initiative into Two

One focuses on limiting taxpayer liability; the other gives voters more say.


Carl DeMaio

A ballot initiative introduced to try to restrain runaway public employee pension costs in California has been split apart and reintroduced as two new initiatives. Proponents plan only to collect signatures for one of them to get it on the 2016 ballot, but they're going to see what Attorney General Kamala Harris does when she titles and summarizes each ballot initiative.

We've blogged before about the "Voter Empowerment Act of 2016," introduced by former San Diego City Council member Carl DeMaio (a Republican) and former San Jose Mayor Chuck Reed (a Democrat). The initiative would have required voter approval to put new government employees into pension plans (instead of 401(k)-style defined contribution plans) or to pay more than half of an employee's retirement and health benefits.

When Attorney General Harris was handed the initiative to summarize prior to signature gathering, as required by law, initiative proponents came away very unhappy. Her summary (as it has in previous efforts) declared that the ballot initiative would "eliminate constitutional protections" for existing government employee protections, even though the ballot initiative is very clear that it would not alter existing pension agreements. Proponents argue that Harris' wording is biased, and she's trying to damage its chances of passage.

So, what they've done is gone back and write up two ballot initiatives. The Voter Empowerment Act of 2016 still exists, but it's a bit streamlined. It would amend the state constitution to require a vote by citizens in any jurisdiction in order to add new employees to a defined benefit plan, and it would require a vote for governments to pay more than 50 percent of an employee's benefits. That's very similar to the previous act, but some other components have been stripped out.

The second initiative filed is titled the "Government Pension Cap of 2016." That initiative caps the government's contribution responsibility for employee retirement benefits to 11 percent of that employee's base compensation—13 percent for public safety employees. It states that employees would be responsible for any other costs, included unfunded liabilities.

This second initiative is obviously intended to make defined benefit plans look more palatable by taking away the guarantee that taxpayers will cover the differences whenever pension funds go bad or come up short. Again, this initiative states that it does not change current agreements, but will apply to successive labor agreements.

In a phone interview, DeMaio said this second initiative does not actually force a shift to defined contribution plans, but rather caps the risk to the public. He said he calculated the percentages based on what he's seen in private sector retirement plans.

"We are eminently reasonable," he says. "In some cases it's a little bit more reasonable than the private sector."

Because the two ballot initiatives are significantly different, he's hoping this would force Harris to have to describe them differently in her summary and avoid the characterization that government employees could lose their existing benefits. But he's going to see what they get from Harris before deciding which initiative they're going to circulation for signatures.

"In all the polling we've seen, the public understands there's a crisis and we need reform," DeMaio says. "The only people who don't understand this are the politicians and the union bosses who want this Ponzi scheme to continue."

(Disclosure: DeMaio has previously worked with the Reason Foundation as an independent contractor on pension reform.)