Can Even the Voters Stop the Public Employee Pension Crisis?

Popular reform in San Diego threatened by California labor board.


I was totally going to, until I saw somebody had put up a sign forbidding it.
Credit: Arenamontanus / photo on flickr

San Diego residents overwhelmingly voted in favor of Proposition B, reforming the city's pension system for city employees, back in 2012. To be more specific, by a two-thirds vote, residents of San Diego voted to essentially close its pension program to new hires (except for police officers). Instead, new employees would be shunted into a 401(k)-style program, where contributions are front-loaded and cities (and more importantly, taxpayers) are not saddled with long-term obligations that cities (and states) often don't adequately fund.

Public sector unions have fought every effort to reform pensions not just in San Diego, but anywhere in California. In San Diego, their opposition has been bolstered by the Public Employment Relations Board (PERB), a government agency that seems to actually serve on the behalf of the employees. They are attempting to order the city to undo the initiative's effects, put the 2,000 employees it has hired since 2012 into a pension fund and pay 7 percent interest as a penalty. The city is resisting.

The city's attorney, Jan Goldsmith, does not seem perturbed. Goldsmith noted to the Los Angeles Times that the city has managed to keep the Public Employment Relations Board from blocking Proposition B from the ballot in the first place, and also managed to get a judge to allow them to implement the measure over the Board's objections. Goldsmith thinks the Board will be smacked down yet again by the courts.

But if PERB is victorious (their argument here is that state law requires cities to engage in good faith negotiations with the unions, which obviously a ballot initiative bypasses), it could cost San Diego a significant amount of money, and they've been counting on these savings in their budgeting. Union heavy Michael Zucchet of the Municipal Employees Association is more than happy point out how much his lawsuits are costing the city as well:

"The city's bill is going to keep accumulating with interest, and it will only get more expensive if they keep filing appeals," said Michael Zucchet, general manager of the Municipal Employees Assn.

Many city budget projections and proposals rely on future pension savings created by Proposition B, so any softening or elimination of the measure could have a significant effect.

Zucchet said the city has hired roughly 2,000 employees without pensions since the cutbacks took effect in July 2012, noting that Tuesday's ruling requires the city to backfill pensions for those workers, pay them 7% interest as a penalty and cover their attorney's fees.

"I don't know whether it's $5 million or $500 million, but if I had to guess I'd say it's somewhere in the $100-million range," Zucchet said.

San Diego's planned expenditures in its 2015 budget were listed as $2.6 billion, so imagine what could happen to the city's finances on the upper end of that calculation.

Read the full story here and marvel at how a largely unaccountable bureaucratic agency is trying to overrule the voters and force those same taxpayers to give more money to city workers against their expressed desires. But there may be a possibility for Californians to push some pension reform via a statewide ballot initiative that would amend the state's constitution. Read more about those efforts here.