Five California Mayors Submit Statewide Ballot Measure -- "Pension Reform Act of 2014" -- That Would Change CA Constitution To Let Cities Negotiate Changes To Current Employees' Pensions/Healthcare Benefits (Not Affecting Benefits Already Earned But Applicable To Future Years of Service)
(Oct. 16, 2013) -- The Mayors of five CA cities have filed a proposed ballot measure with the CA Secretary of State's office (to obtain a title and summary in preparation for gathering signatures statewide) that would change the CA constitution to let government agencies negotiate changes to current employees' pension and healthcare benefits, not changing benefits already earned but letting agencies negotiate changes applicable to future years of service.
If the proponents gather sufficient signatures statewide, CA voters would be asked to approve the "Pension Reform Act of 2014" that would change the CA constitution to eliminate the "vested rights" principle that now blocks government bodies from negotiating reduced pension benefits.
The Mayors of San Jose, San Bernardino, Santa Ana, Anaheim and Pacific Grove (four Dems and one Repub) jointly filed the measure.
[UPDATE] As of midmorning Oct. 16, Mayor Bob Foster's office tells LBREPORT.com that the Mayor doesn't have a comment(s) at this time, saying he hasn't read the ballot measure yet. [END update]
To read the full text of the proposed measure, click here.
To read the proponents' letter to the CA Attorney General's office accompanying their ballot initiative submission, click here
[www.reformpensions.2014.com] A group of California Mayors -- including San Jose Mayor Chuck Reed (D), San Bernardino Mayor Pat Morris (D), Santa Ana Mayor Miguel Pulido (D), Anaheim Mayor Tom Tait (R) and Pacific Grove Mayor Bill Kampe (D) -- have filed a statewide ballot initiative to provide state and local governments with the tools needed to fix California’s unsustainable public employee retirement plans.
The Pension Reform Act of 2014 would amend the California Constitution to give government agencies clear authority to negotiate changes to existing employees' pension or retiree healthcare benefits on a strictly going-forward basis.
The measure explicitly protects retirement benefits government employees have already earned, while allowing benefits to be modified for future years of service.
"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 before even tougher actions are necessary," said Mayor Chuck Reed of San Jose.
"During tough economic times, we 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."
Federal law allows private pension plans to prospectively change employee retirement benefits. At least 18 states have the flexibility to do so for public employees as well. However, in California, a series of judicial decisions has made it extremely difficult for government employers to make any changes to retirement benefits for existing employees, even if he/she has only been on the job for a single day. (Read Professor Amy Monahan’s article detailing the genesis of the so-called "California Rule" on vested rights)
Given California's skyrocketing retirement costs and huge unfunded liabilities for pension and retiree healthcare benefits, numerous independent experts have argued that prospectively modifying current employees’ benefits is the only way to solve the problem. This includes the state’s Little Hoover Commission, which determined:
"Public agencies must have the flexibility and authority to freeze accrued pension benefits for current workers, and make changes to pension formulas going forward to protect state and local public employees and the public good."
- Little Hoover Commission: Public Pensions for Retirement Security (2011)
The Pension Reform Act of 2014 also includes provisions to:
Prevent the State of California, pension plan administrators, and other government boards from interfering with elected leaders’ or voters' ability to amend their public employee retirement benefits for employee' future years of service.
Protects existing collective bargaining agreements by requiring government employers to wait until current labor contracts expire before negotiating changes to retirement benefits.
Require any government agency with a pension plan that is less than 80% funded to prepare and publish a public report outlining how it can achieve full-funding in 15 years.
The measure was filed with the CA Secretary of State's office on Oct. 7. On Oct. 15, the leadership of the California Public Employees Retirement System ("CalPERS") issued a release blasting the proposed measure:
[CalPERS statement] Public employee pensions are deferred compensation, a key part of the compensation of public employees, and a valuable tool for those employers who choose to use them. Public employees work hard during their careers to serve their fellow Californians and virtually all contribute toward their retirement each month. Secure and reliable pensions benefit the California and local economies, aid in recruiting and retaining employees, improve workforce stability and ensure the quality of life for retirees in our communities.
The retirement benefits promised to employees, and guaranteed by the federal and State constitutions, are determined by the employers and the employees, not by CalPERS. The courts have clearly established that California public employees have a vested right to the level of benefits promised to them when they are first employed. This prevents not only a reduction in the benefits that have already been earned, but it also prevents a reduction in the benefits that an employee has been promised for their future service. CalPERS is bound by fiduciary duty to deliver the promised pension benefits according to the U.S. and California Constitutions, statutory law and case law. The California voters placed these protections and duties in our Constitution to ensure that employees’ pensions would be protected by CalPERS as their fiduciary and trustee. CalPERS will continue to support and defend our members’ vested rights, in accordance with the laws of the land and our obligations under the federal and State constitutions.
All Californians deserve a secure retirement. A better solution would be to help those without pensions find ways to save for retirement, not to reduce the pensions of those who already have them. Changes to pension benefit levels should be determined by the employer and the employees, and not at the ballot box. If this initiative were to pass, then all contractual rights in California could be in jeopardy. Fairness and the rule of law are the foundations of a society that honors and respects the promises made by that society to its public servants.
Developing...with reaction from local officials coming shortly -- and your reactions welcome below right now -- on LBREPORT.com.
