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.