A review of the June 5 election presented Californians with some interesting issues with redistricting, open primary, and local pension reform appearing on ballots. Redistricting presented some of us with different candidates than those we identified with in the past. Open primary has created the need to use a different strategy during the primary, as the top two vote-getters will face each other again in the November General Election so tactics and posturing in June has taken on new importance. But pension reform measures caught my interest the most as the cost of employee salaries and salary related benefits (pensions) have been increasing at a rate faster than revenues and if not held in check could be a financial death nail to a municipality’s survivability.
There were 3 pension reform issues on the June 6 ballot, two in California and 1 in Wisconsin. The issue in Wisconsin was the potential recall of their Governor for challenging the current pension system. The Governor was not recalled and won by the same margin he won by when he was elected (53%). Closer to home, the two California measures, one in San Jose and one in San Diego attacked the current public employee pension structure. Oddly enough, both measures were labeled Measure B. San Diego’s measure to reform the pension system passed by over 66% of the vote while the San Jose measure passed by approximately a 70% margin.
Both the San Diego and San Jose pension reform plans will allow current workers to keep pension amounts that they have already earned while reducing future earnings. Employees will be expected to make more contributions themselves.
While negotiating Foster City’s employment contracts in the first half of 2011 with the Police and Fire bargaining units, agreement was reached that a two-tier system was accepted. Existing employees will be receiving 3% at 50 and newly hired employees will receive 2% at 50. These agreements will certainly have a positive impact to our city’s financial situation in the future. But even with these reforms in new hire pensions, it could take decades to see any significant impact on pension payments from the city.
The Little Hoover Commission, a nonpartisan organization, produced a report in February, 2011 entitled Public Pensions For Retirement Security (http://www.lhc.ca.gov/studies/204/Report204.pdf). Included with the report is a letter to the Governor and the 4 leaders of the California Legislature stating “California’s pension plans are dangerously underfunded, the result of overly generous benefit promises, wishful thinking and an unwillingness to plan prudently.” They pointed out that unless aggressive reforms are implemented immediately, the problem will worsen forcing municipalities to take drastic measures by making draconian cuts deeply into services and staffing in an effort to fund these pensions. Some cities will be forced to consider bankruptcy much like Vallejo did.
It appears that the Governor already heard the message by developing a 12-point pension reform plan he has proposed for the State. Unfortunately, the Plan has had difficulty gaining any traction in the Legislature. Perhaps, after reviewing the recent election results in San Jose, San Diego, and Wisconsin, the phrase “reconsideration of my position” might creep its way into their vocabularies.
As the “baby boomers” are reaching retirement age, it can be expected that there will be an increase in the number of retirements over the next several years. However, more retirements might be expected depending upon the paths of the pension reform movement. Over the past year, Foster City has seen the Assistant City Manager and Community Development Director retire, while both our Fire Chief and Police Chief have announced their retirements.
The San Jose measure addresses the pensions of current employees, not just new hires. The sanctity of the pensions of current employees has been attacked by the San Jose measure and most assuredly will be heading to the courts to sort out. The results of any court decision will have a tremendous impact on public employee pensions as well as the fiscal viability of the governmental entities.
As more and more measures make their way to the ballot box, are passed by the voters, and then drug off to court, will we reach a point where the court system becomes our legislative arm of the government? That outcome is not as I learned about our government and how it is supposed to work or at least was designed to work by our forefathers almost 250 years ago.
I would appreciate your comments on this and other issues by emailing me at email@example.com or 650-573-7359.
June 27, 2012
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