It was inevitable once the number of signatures needed to put a constitutional amendment initiative on the statewide ballot dropped by 300,000 following last fall’s election:
A measure to change the pension system governing many California public employees will be voted on in November of next year.
Equally unsurprising are the identities of its two major sponsors: former San Jose Mayor Chuck Reed and ex-City Councilman Carl DeMaio of San Diego, who has failed in runs for mayor and for the congressional seat now held by Democrat Scott Peters.
The exact content of the initiative is not yet certain, although both politicos say they may have their measure ready as early as next month for review and titling by state Attorney General Kamala Harris, who likely will share the ballot with the initiative as she runs for the U.S. Senate.
Given what Reed and DeMaio have done via local ballot propositions in their own cities, it’s a virtual certainly their measure will contain something forcing public employees at the state and local levels to increase their contributions to pension funding. It will also most likely give local governments the power to renegotiate with unions the pension benefits paid for future work, while leaving all vested benefits in place. And it might set up 401(k)-style accounts for some future public employees, rather than fixed benefits paid through CalPERS, the California Public Employee Retirement System.
When Reed tried to put a measure much like that on last fall’s ballot, he ran afoul of the attorney general, who must write an objective summary and title for every initiative before petition circulators begin seeking signatures.
Harris’ summary said the 2014 Reed measure would “eliminate constitutional protections” for some workers, including teachers, nurses and law officers. Reed strongly objected to this description, but it was upheld in court and the effort went nowhere.
Now, with the petition signature threshold for proposed state constitutional amendments down from 807,000 to 504,000 because of last fall’s low voter turnout, Reed and DeMaio are working to craft something Harris-proof.
“Some of the San Diego and San Jose policies will be included,” Dan Pellessier, president of a group calling itself California Pension Reform, working with Reed and DeMaio, told a reporter. “But we have to make it hard for Harris to make this look like a dirt sandwich, as she did before.”
That’s a challenge, because no matter how they try to sugar-coat it, Reed and DeMaio will be trying to take money from public employees either at the front end, via increased contributions, or at the back end, via reduced payouts or a change away from fixed benefits for new employees.
Something, however, has to be done. For even after the reforms pushed through by Gov. Jerry Brown early in this decade, many of the state’s 130 public pension systems are unhealthy, underfunded. In 2013, then state Controller, now Treasurer, John Chiang reported 17 plans were underfunded by at least 40 percent, 45 per underfunded by 20 to 40 percent and 22 more had shortages of 20 percent or less.
Altogether, the state’s unfunded pension liability had risen to $198 billion from $6.3 billion in 2003.
“Rising salary and pension costs for state and local government workers have outpaced the…new tax revenues generated by (the 2012) Proposition 30,” DeMaio claimed in an essay.
One result is that CalPERS will soon begin raising assessments of cities and counties to help meet their pension obligations, administered by that agency in most cases.
“It is clear that politicians in Sacramento are not serious about reforming unsustainable pension benefits,” DeMaio said. He complains that public employee pensions far outpace those in the private sector, where fixed-benefit plans are mostly a thing of the past, enjoyed by many of the currently retired, but a mere fantasy for most of today’s workers.
The challenge for DeMaio and Reed lies in crafting a plan that doesn’t renege on promises and contracts previously agreed to, while still saving money. That’s a very tall order.
