Mayors Want Power to Lower Workers’ Future Pensions

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A group of mayors is proposing a ballot initiative that would give cities the ability to lower pension benefits for existing employees’ future years of service, reports the Orange County Register.

The Pension Reform Act of 2014 would amend the state constitution to allow government employers and voters to lower retirement and healthcare benefits going forward.

It would also require underfunded pension plans to develop a plan to make their benefits 100 percent funded.

Supporters, which include Anaheim Mayor Tom Tait and Santa Ana Mayor Miguel Pulido, say the measure is needed to give city leaders the flexibility to lower pension costs, which have been taking up a growing portion of city budgets.

Meanwhile, labor leaders are warning that it’s a radical proposal to cut benefits promised to current workers, many of whose pensions are about $26,000 per year.

From the Register’s story:

“Many of California’s public employee retirement plans are simply unsustainable and it’s in everyone’s interest to provide the tools to fix the problem now …” [San Jose Mayor Chuck] Reed said in a prepared statement. “(W)e believe employees would much rather adjust their future expectations than risk seeing their accrued benefits slashed in bankruptcy. We’ve already seen that tragic situation play out in cities like Stockton and Central Falls, RI. Our teachers, police officers, firefighters and other dedicated public servants deserve to know that the pensions they’ve earned will be there when they need it — not just the day they retire, but also when they’re 85 or 90.”

But defenders of the current system are having none of that.

“This extreme proposal, advanced by a career politician and funded by a former Texas-based Enron trader, breaks the promise of a secure retirement made to millions of Californians, many of whom are ineligible for Social Security and have an average pension of $26,000 per year,” said Dave Low, chairman of Californians for Retirement Security, which represents more than 1.5 million current and retired public workers. “It will allow public employers to unilaterally cut the retirement benefits promised to current teachers, firefighters, police officers and school bus drivers — a promise upheld by the Supreme Court …”

This all comes against a backdrop of significant pressure on public pension plans, whose unfunded obligations have skyrocketed over the last decade largely due to a combination of benefit increases, market losses and changes in actuarial assumptions.

That includes the county of Orange government, where workers’ unfunded liability has soared from just over $1 billion in 2004 to more than $5 billion today.

In response, many employees at the county and city levels have agreed to pay more into their pensions and lower benefits for new hires.

The Orange County Employees Association has also struck a deal to allow current employees to opt in to a lower benefit tier. That effort has failed to gain required federal approval amid a strong challenge from one of the nation’s largest employees unions.

As far as the mayors’ effort, a summary of their initiative is being written by the state attorney general’s office before it’s handed to California Secretary of State Debra Bowen, who will set a deadline for gathering signatures.

In order to qualify for the November 2014 ballot, supporters will have to gather just under 808,000 signatures over a five-month period.

Please contact Nick Gerda directly at ngerda@gmail.com  and follow him on Twitter: @nicholasgerda.

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