Pension reform initiative abandoned for 2016

Unions pension public sectorThe landmark effort to take public pension reform straight to the people of California has been withdrawn from ballot consideration.

“Beleaguered by fundraising doubts and attacks from organized labor, two former California officials said Monday they are backing off plans to place a measure on the November ballot intended to curb public pension benefits,” the Sacramento Bee reported. “Instead, former San Jose Mayor Chuck Reed and former San Diego Councilman Carl DeMaio said in a joint announcement, ‘We have decided to re-file at least one of our pension reform measures later this year for the November 2018 ballot.’”

Staying solvent

The news marked a sharp reversal for critics of the state’s pension spending, which has ballooned apace with California’s freshly flush balance sheet. The price tag for guaranteed health coverage alone has put Sacramento on notice of the size and scale of the problem. “The state has promised an estimated $72 billion in health care benefits for its current and future retirees, an amount that will increase to more than $300 billion over the next three decades, according to the governor’s Department of Finance,” according to the Associated Press.

Gov. Jerry Brown has sought to bring those costs under control in a way that won’t spur a revolt within his own party or hand too much power to Republican legislators. “Brown proposes prefunding benefits similar to the way the state pays for pensions — by paying into a trust fund that accrues investment returns over time, reducing the amount of money that taxpayers must contribute in the future,” the AP noted. “In negotiations with public employee unions, he’s asking state workers to pay into a fund through a deduction on their paychecks. The state would pay an equal amount.”

A firmer approach

The Reed/DeMaio proposals would have tackled unions in a much different way.  “Reed and DeMaio had filed two proposals for the November 2016 ballot, planning to choose one,” as the AP reported separately. “One would have put employees who first join a public pension system on or after January 2019, into 401(k)-style retirement savings plans that guarantee fixed contributions from employers instead of fixed returns. The second measure would have capped how much employers could pay for new hires’ retirement benefits to a certain percentage of their salary.”

Public opinion studies produced conflicting portraits of how much support for the initiatives Reed and DeMaio could count on. “Apparently the measure to force new employees into 401(k) style ballot initiatives did not poll well (even though a 2015 poll by Reason-Rupe showed majority support for such a shift),” as Reason observed. “The measure to cap the amount employers could contribute to pensions fared better in polls, but according to Reed, they weren’t able to raise enough money to collect signatures and prep for an expensive battle with California’s public unions.”

Finding funding

That difficulty struck at the heart of the year’s complex political landscape. “The stark reality is that within the state, there are no deep pockets to finance such a campaign,” Dan Walters noted at the Bee. “However large they may be, fast-growing pension and health care liabilities don’t discomfit any major interest groups, since their greatest impacts are on local governments, especially cities, rather than on state government.” That would have likely pushed the initiative’s supporters into a scramble for cash.

The necessity to look far and wide for money fostered its own kind of political optics problem. “Any reform campaign would be dependent on money from one or more wealthy individuals, probably from out of state, and it hasn’t materialized,” as Walters observed. “Conversely, any broad retiree benefit reform effort would draw implacable, high-dollar opposition from unions.” So even if the reform effort gained an adequate sponsor, Golden State unions would be able to portray their high-dollar spending as more of an in-state groundswell than their opposition — a potentially substantial advantage in a populist election season.

Originally posted on