Last year, a group of dogged California pension reformers gathered in a hotel in downtown Sacramento. There, they plotted the next step for a reform movement that seemed poised to tap into voters growing interest and concern. Unfunded pension liabilities werent just weighing down the states balance sheets. Golden State cities—on the hook for six-figure pensions for their police and firefighters—were being pushed to the brink as the economy struggled to recover from the Great Recession. Some cities, such as Stockton and San Bernardino, went into bankruptcy. Media reports were filled with stories of the greed of government employees.
Reforms time had come—or so it seemed. But by last years meeting the most hopeful opportunities were gone. The economy had rebounded and the states voters, in approving a large tax increase backed by Governor Jerry Brown, essentially put an end to the short-term budget crisis. Not that short-term budget deficits had much to do with the Golden States long-term debts, but the financial doom and gloom faded from the headlines, replaced by a new narrative touting Californias comeback.
In June 2012, voters in two heavily Democratic cities—San Jose and San Diego—approved pension-reform measures. San Joses was the most far-reaching, in that it challenged the core obstacle to serious pension reform in California. In fact, the courts have consistently ruled that governments cannot reduce pension promises made to current employees. San Jose claimed that as a charter city it could indeed do this and voters, by a 70 to 30 percent margin, agreed to give city employees an option: Pay more for the current plan or choose one with lower benefits. But a Santa Clara County Superior Court judge gutted the reform measure, saying San Jose could cut its employees pay, but not their pension benefits.
San Diego voters, by a similar margin, approved a 401k-style deal for new workers and a cap on pensionable pay. A state government agency, the Public Employment Relations Board, continues to claim that the vote was illegal (it insists that the city should have negotiated with employees first, even though the measure was qualified for the ballot by voter petition). But San Diegos approach has passed its legal hurdles despite the continuing PERB harassment.
Already bruised by the court defeat, San Jose mayor Chuck Reed found his effort to launch a statewide initiative undermined by Californias highly partisan attorney general, Kamala Harris. She wrote a title and summary for the measure that read as if they were written in a union office. With a negative title and summary, proponents realized that they could never qualify the measure for the statewide ballot. So Reed withdrew it. The unions won again.
Thats all a necessary backdrop to the Sacramento meeting, where activists—including former San Diego city councilman Carl DeMaio, now a congressional candidate—promoted a new plan. It was sensible and focused on the positive. Despite the legislatures refusal to fix pensions (beyond a superficial reform signed into law as a means to coax voters into supporting the Proposition 30 tax increase in 2012), despite the courts refusal to allow changes for current employees, and despite the attorney generals obstructionism, San Diegos measure had survived. So reformers thought it might be a good idea to take that approach and spread it to Californias so-called 37 Act counties. A 1937 state law allows counties to create separate retirement funds distinct from the state system. There are 20 such counties, including Los Angeles, San Diego, and Orange.
Ventura County had a group of eager pension-reform activists, so DeMaio and others touted a signature drive there to place reforms on the ballot that included 401k-style plans for new hires, a potential cap on pensionable pay, and limits on pension spiking. Once Ventura approved it—and voters surely would, despite opposition from a union-friendly board of supervisors—the movement would spread statewide.
Naturally, the public-employee unions sued. And in a ruling that DeMaio described as deplorably off the mark, Ventura County Superior Court judge Kent Kellegrew on August 4 rebuked the measure, taking the unusual step of keeping it off the countys general election ballot. The judge said that the 1937 law didnt include language for counties that want to remove themselves from the local pension funds, making the proposed measure illegal. He called on reformers to take their case to the legislature—where all pension reforms go to die. Kellegrew also said the measure violated the states single-subject rule. He claimed that the new pension plan and a cap on pensionable pay amounted to two separate issues, and only one is allowed for an initiative.
The Ventura reformers told the local newspaper that they would not appeal Kellegrews decision. They dont have pockets deep enough to compete with the states labor unions, which rightly saw Ventura as a potential groundbreaking initiative. So virtually every approach has failed thus far.
DeMaio, the epitome of the happy warrior, isnt giving up and wants to focus again on a statewide initiative campaign in 2016. The problem isnt going away. Unfunded liabilities are high and cities are still struggling. How dogged will the reformers remain?