Public pension reform gaining traction
April 20, 2012
As a subject of general discussion, California’s skyrocketing public pension situation has come a long way in a very short time, one of the state’s leading authorities on the subject said Thursday.
Marcia Fritz, president of the California Foundation for Fiscal Responsibility (CFFP), told a gathering of business and property owners that despite the greater interest, public pensions and benefits in this state are proving particularly difficult to impact, even in an economic crisis. CFFP is a statewide organization advocating for public pension reform.
“The issue of public pensions has engaged the people of California like no other issue,” Fritz said at a meeting of the San Luis Obispo Property and Business Owners Association at Cafe Roma.
“This problem has been around for a long time, and we’ve barely scratched the surface.[Governor Brown] knows it, he gets it, and he has proposed a 12-point pension reform plan which he knows is critical for his tax proposal,” said Fritz. “If he can’t show that there has been movement by labor to make comprehensive cuts in California, the governor’s (proposed) tax increase will suffer.”
But she predicted Brown’s pension reform plan “will pass overwhelmingly. This will be good for fiscally stressed cities. A statewide pension reform will help a lot of cities.”
San Luis Obispo County is one of 248 California agencies (out of 1,600 public agencies) that has reformed their pension plans in recent years.
Further complicating the matter for voters here is the fact that California is the only state in the nation that allows pension benefits to be negotiated at the bargaining table. It’s also the only state with constitutionally-protected public pensions and benefits, which makes it exceedingly difficult to make progress in reform, said Fritz.
“Many of those in management who negotiate these contracts are also negotiating for themselves, and that is not right,” she told the group.
“It’s a cookie cutter system — [there are] 12 different formulas, three or four dozen optional plans — every time labor sits down with management, they just go through the Sears catalog of products and pick them, one by one, and the result is they have been getting their benefits enhanced regularly. And once those benefits are enhanced, our state constitution makes those a vested right.”
That means those pension levels and benefit packages “cannot be taken away” and never altered, changed, or lowered.
It’s a different situation in the rest of the states, authorities of which can appeal to federal courts for relief.
Fritz said that federal judges have “generally” been ruling in favor of managers of debt-ridden agencies, by first eliminating retirement health coverage, then cost of living increases for retirees.
“That’s what’s going on in other states,” she said, but existing constitutional protections mean California courts have no say in the matter, she noted.
Fritz believes that a better system of reporting of pension plans would be a step in the right direction.
“The system has been so abused, that the only way I can figure a fix is by putting the real costs before the public,” she said. “If people could go to [their local agencies’] website and see what’s really going on,” significant change might be possible.
And changing the constitution will not impact current plan holders.
“If we don’t enjoy a real upswing in the economy, it going to be really, really painful” for California agencies and, ultimately, taxpayers,” she said. Benefit enhancements already promised will have to be borne by taxpayers.
Fritz lauded county managers for their efforts in pension reform.
“I’m very impressed with what the county is doing,” she said. “ But the city of San Luis Obispo has not gone far enough. Their current plan has only achieved a 43 percent reduction in the goal, and that is not good enough. If certain factors do not come into play, [the city] will face serious financial problems.”
Unions in this state have regularly opposed any plan to require employees to pay half of their retirement costs while working. And that, she said, is contributing to public dissatisfaction with the way things are being done.
“Unions are going to hurt, because they know that people support the idea [of public pension reform], and if the unions fight it, they will not have any hope of tax increase. And people are inflamed. They do not like the $100,000-pension club — there are 22 from the city of San Luis Obispo, and that’s a lot, and it’s growing.”