League calls for reduced pensions for current city workers

August 15, 2011

Officials with the League of California Cities are offering a new pension reform plan for struggling California towns, proposing a “detailed legal review”of whether pensions promised current workers can be reduced. [Calpensions]

“Pension sustainability cannot be fully achieved without addressing the benefits of both current and future employees,” said the League of California Cities plan issued late last month.

The League proposal, similar to one issued by the watchdog Little Hoover Commission last February, is widely believed to be prohibited by recent court rulings.

As pension costs soar, particularly in local government where most spending is on personnel, savings from clearly legal changes (mainly higher pension contributions from workers and lower pensions for new hires) are said to fall short.

“Rates are going to continue to go up to a point where for every person working for the city you are paying for another one that’s not,” said Mayor Tom Chambers of Healdsburg after attending a statewide workshop on pension reform last week.

However, many  state and local government employers believe that a series of court rulings mean pensions promised workers are, from the date of hire, “vested rights” under contract law that can only be cut if offset by a benefit of equal value.

One of the 27 recommendations in the League plan would authorize CalPERS to offer the option of a “hybrid” combining a “defined contribution” or 401(k)-style individual investment plan with a lower pension.

Meanwhile, a proposal by San Jose Mayor Chuck Reed, based on other court rulings, would use the declaration of a fiscal emergency and a local ballot measure to reduce pensions earned in the future by current workers in the two city-run plans.

Closer to home, San Luis Obispo voters continue to wrestle with the debate over Measure A in the special mail-in election. Voters have until Aug. 30 to return their ballots. Measure A, if passed, allows city council to negotiate reduced pension benefits for new employees.

 

 


19 Comments

  1. rogerfreberg says:

    Both Presidents Roosevelt warned of public unions. The chummy relationship between elected officials and public unions has hurt us all.

    Like or Dislike: Thumb up 15 Thumb down 6

  2. stopagenda21 says:

    We must break the union stranglehold they have on our city, county, state and federal public employee systems, or our tax dollars will be used to fund only retirement benefits and not the infrastructure they were intended to be use for. And you can start by voting yes on A and B

    Like or Dislike: Thumb up 15 Thumb down 7

  3. ososkid says:

    If only people would hold the Bankers and CEO responsible for the actual role that they played in taking our economy down, instead of piling on teachers, cops, and firefighters who are not responsible. If you look at a teacher, cop or fireman and what he or she actually contributes to society and think they are robbing us blind, you’re not only stupid but you’re also a dirt bag

    Like or Dislike: Thumb up 15 Thumb down 14

    • whatisup says:

      Your view is the problem in our country.

      You are correct that the Bankers and CEOs played a huge part in the problems with our economy, but so did parts of the public employee sector. The left wants to put all the blame on business, republican policies, etc. and accept none of the blame for out of control social spending, and obscene public employee compensation in many instances.

      On the other hand, the right is so stupid they want to give tax breaks to billionaires, don’t want to pay for their programs and wars, and believe that business does not need rules and regulations because businesses and CEOs would never lie, cheat or steal.

      Somehow we have ended up with large numbers of American adults who are able to walk around every day with one eye open and the other eye closed.

      Like or Dislike: Thumb up 6 Thumb down 0

      • Typoqueen says:

        I can’t speak for all libs but as for myself, I don’t feel that the we are to blame. I believe like many libs that in many (not all) cases public employee comp are too high. Their perks should be commiserate to the economy and job performance. If the economy is down then so should their perks if everyone is living on easy street then so should they. I don’t feel like most libs blame ‘business’. Like myself many libs are self employed. It’s the big corps, the really big ones that are the problem. Like Buffett said, the fat cats making over a mill$ aren’t paying their fair share. But I don’t blame them, I blame the govt for allowing them to not pay their fair share and that is the completely the fault of the right.

        Many of us believe that this issue that the cons have with social spending is overly exaggerated. The problem isn’t Social Security, Medicare, Welfare. Yes there’s some abuse with those things. There are foster parents that have 10 foster kids simply for the money, there are lazy people getting welfare but we need those things and I believe that most people that use them need them, they’re certainly not getting rich off of our backs like the big corps are. But over all I don’t believe that most people abuse the systems in place. The problem as I’ve stated numerous times lately is the waste and lack of taxing of the wealthy. The waste and bureaucracy has become an absolute joke. You can ask any public employee ie social worker and they will agree, it’s ridiculous. I was under the assumption that when Obama appointed all these czars that their job was to find this waste and to find ways to cut back on spending. This has been one of my biggest disappointments with Obama. Perhaps I’m wrong, perhaps these czars are working on these issues but I haven’t seen any sign of it as of yet. I supported the czars, in theorey it’s a great idea. Get a dept head to go in and clean things up. Oh well, all is pro quo.

        Like or Dislike: Thumb up 0 Thumb down 0

  4. racket says:

    I do not understand the illegality of changing pension/benefit pkgs for current employees, ie, the concept of “vested rights.”

    In the real world of employment (ie, non-governmental), the company can ask the the employees to share the misery when business falls off. In the real workd, employess do not have a “vested right” to continued employment at a rate unsustainable by the company. Why is it different in public sector employment?

    Like or Dislike: Thumb up 15 Thumb down 7

    • Typoqueen says:

      “”detailed legal review”of whether pensions promised current workers”

      There used to be a day when a promise meant something. If someone signs a contract promising to pay someone a certain amount then it seems that contract couldn’t be broken unless the employee himself dose something to violate that contract. Regardless if it is legal or not though it seems like morally we should keep our promise to these employees. I’m not saying that they’re not over paid or that they don’t get too many perks but many of these people have based their retirements, their home payments etc on what they were promised. It’s not their fault that feds/state can’t handle their finances or that they promised them too much. I don’t like it when you people make govt. employees into villains. They aren’t villains, they are our friends, cousins, brothers etc. and have done nothing to warrant the current right wing hatred that seems to be quite trendy with the Tea Bagger crowd at the moment.

      Like or Dislike: Thumb up 12 Thumb down 11

      • racket says:

        TQ: What I am trying to get at is the *continued* unsustainability problem. I agree it would be grossly unfair to promise the moon and deliver squat. The employer (you and me) has already promised X for the performance of Y, and Y has been performed. Looking forward, we must gain control of the cost of having Y performed.

        A two-tiered system is a no brainer. No new hires should receive the benefits that are bankrupting the local governments.

        But part of the problem is going forward tomorrow with all the current over-compensated workers. Again, former promises must be kept, but continuing to promise that which we have no mechanism to deliver is folly.

        I envision a system where current employees’ pensions are funded to the limit promised up until today, then offering a plan that works for both sides tomorrow.

        Let’s use the example of 3% matching per year of service. If you’ve got 15 years in service as of today, you are guaranteed 45% of your pay upon retirement. Starting tomorrow, we aren’t going to do that anymore. We are going to find a retirement system that the governments can afford and we are going to offer THAT. Those that like the new compensation package will stay on; those that don’t can shop for better pay elsewhere secure that their 45% of base pay will be available to them upon retirement (or whatever original contractual obligations were made.)

        Like or Dislike: Thumb up 8 Thumb down 4

        • scapegoat says:

          So you expect public employees who have 15 years in to figure out how they are going to come up with half their retirement on their own in a down economy in a unrealistically short time frame? Yeah, that real fair! Get off the BS band wagon. The problem is not retirement and pay, its a over abundance of employees (Mostly a State employee problem). Why so many employees? Illegal immigrants, welfare, Medi-Cal recipients and over regulation. Let fix the real problems. You think those will go away by taking the benefits from the people who actually contribute to society. Wrong, it will get worse.

          Like or Dislike: Thumb up 0 Thumb down 0

          • racket says:

            Let me try again.

            Under the racket plan, the promised pensions will be delivered for work completed up until, say August 16th. Whatever crazy pension scheme we promised will continue to accrue until today.

            Starting tomorrow, we reset the pension allowances to something that we can afford. it probably will not be as generous.

            The affected employees may either choose to continue to accrue pay and pension at the new rate; or they may choose to work elsewhere.

            Should they choose to work elsewhere, their previously-earned pension be escrowed until such time as they retire, at which time it will be paid out to them at whatever rate we initially agreed upon.

            I do not see another fair way to bring our public employee retirement obligations in line with the monies available. Do you?

            Like or Dislike: Thumb up 0 Thumb down 0

    • xhogboss says:

      Both parties have to live by the bargain made at the time of hiring. One party says, “come to work for me, perform the work satisfactorily until you’re such and such age, and I’ll give you X as a retirement benefit.” The other party accepts and performs the work for the specified time. A contract is made and satisfied, and the promise must be fulfilled.

      The California Constitution says, “… a law impairing the obligation of contracts shall not be passed.” You can make a different arrangement with new employees, but you have to stand by the one you made with the ones already in place.

      If contractual obligations were based on the sustained ability to pay, I could have you perform some duty for me, let’s say cutting weeds, and then not pay you because I didn’t have the ability to pay when you finished that I did when I hired you. That’s not fair to you, because you performed the work I asked you to. Why would it be OK to change the terms of an agreement because someone works for a city rather than for a private business?

      And, their world is every bit as ‘real’ as yours. They pay the same price for goods and services as anybody else. Furloughs, lay-offs and reduced wages hurt them just as much as they do you.

      Like or Dislike: Thumb up 11 Thumb down 5

      • racket says:

        hogboss:

        I agree it would be illegal and immoral to unilaterally change the deal after the work had been done.

        You must pay me at the rate we agreed for cutting your weeds yesterday.

        On the other hand, you have every right to change your offer for pay for tomorrow’s weeds. If I can find someone who appreciates my weeding more, I will go to work for them. If I cannot find a better deal elsewhere, I will come back and cut your weeds tomorrow at the new lower price.

        Like or Dislike: Thumb up 5 Thumb down 2

        • Typoqueen says:

          No, a contract is a contract. If I go out and buy a car on a 5 year payment plan, the finance company can’t come into the deal in 2 years and say ‘okay, you made your payments as agreed up until now but now we’re going to raise your payments’. They agreed to that payment plan even though we haven’t paid those future payments yet. If I fill out a contract saying that you will pick my weeds in my yard for 60 years at $5.00 a week with no other clauses then you have to legally do that. You can’t come in 3 years later and say that you are going to raise your rates to $8.00 for all future weed pulling. You agreed to 60 years at $5.00 and don’t forget the agreement of 60 years, that means you can’t back out of it. It’s black and white,,,,,, I’m not too sure how legal that contract would be but you get the idea. A contract can’t be broken just because one party changes their mind unless both parties agree to it.

          Again, I’m not saying that some of these govt. employees aren’t over paid but we must/should cut back on new hires not the present employees IMO. I feel that we can actually hurt the economy by cutting back on what the present govt. employees make. But that’s a whole diff. story.

          Like or Dislike: Thumb up 0 Thumb down 0

          • racket says:

            I think we’re whipping a dead horse, but,

            Are you saying that only the employee is permitted to end the employment contract for economic reasons. Surely the employee should be able to quit his job because he found one that pays better or offers some benefit that he believes is superior. Why then, is the employer not allowed the same latitude?

            Like or Dislike: Thumb up 0 Thumb down 0

  5. Typoqueen says:

    Even though I feel that they get too much in terms of their pensions and in many cases their pay, I don’t feel that it’s fair to cut back on the people that are already there. From now on when hiring new employees they should be hired with pay reductions and smaller perks. I want to start a new activism group called ”stop the bureaucracy. Bureaucracy plays a huge role in why tax payers are taking it up the….

    Like or Dislike: Thumb up 7 Thumb down 5

    • Spirit Filled says:

      Let’s say I get hired on at a lower pay what happens when the economy gets better and everyone’s fat with money? The employer decides he wants top of the line people so he raises the pay for his new employees. Do the previous hirees get a raise to match the new scale? If not there will be a war “heard round the world.” Soon everyone will belong to a Union, then where will we be? In the same trouble we are in now.
      God Bless you guys. I know one of you highly intelligent people can solve the country’s problems.

      Like or Dislike: Thumb up 0 Thumb down 0

  6. SanSimeonSam says:

    At a minimum make these people wait until they are 66 to collect the taxpayers portion of their retirement. If they actually contribute anything themselves they are entitled to get it whenever, BUT the taxpayers portion should not be paid out until they are 66. (As with Social Security like the rest of us) That would help. Then lets look at the outrageous welfare status of 90 percent after 30 years.

    Like or Dislike: Thumb up 18 Thumb down 7

    • scapegoat says:

      Yes, because a 65 year old cop or firefighter is who I want coming to my assistance.

      Like or Dislike: Thumb up 0 Thumb down 0

      • Spirit Filled says:

        I beg your pardon. So what if I can’t lift a person out of a house that’s on fire, or see someone at a distance robbing someone. I can hire someone like you to do the dirty work. I have great judgement and wisdom and don’t feel the least bit insulted if you don’t want me as your best friend. So what if I can’t run, you can do it for me, hey I can walk, a little slow perhaps but I get there cane and all.
        Don’t be so quick to demean the seniors. When you need help I may be the only one around that can talk your neighbor into helping you.

        Like or Dislike: Thumb up 0 Thumb down 0

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