Why Labor Should Resist Brown’s Pension Envy
After arguing last week that labor would be crazy to fight Gov. Jerry Brown’s proposals for pension reform, we invited Steve Maviglio, consultant to the union-backed Californians for Retirement Security, to respond to our brilliant, well-reasoned and responsible points. Here’s his offering.
By Steve Maviglio
Special to Calbuzz
At first glance, Gov. Jerry Brown’s 12-point package of pension reforms, released last week, looked like a deft political play, even winning over the usually sharp Calbuzz pundits.
It won gushing support from editorial writers across the spectrum. The Wall Street Journal equated it with Nixon going to China. Goo-goo government types from California Forward and Think Long praised it. And predictably, it was trashed by labor on the left as too strong and bashed by the uber-right as not going far enough.
But for the long haul, Brown may have negotiated against himself. His new set of proposals goes beyond those that Senate Republicans wanted this past spring in exchange for budget votes. So count on this: if Brown’s ambiguous measures are modified by the Legislature (and even the LAO’s tightwads suggested alternations yesterday), then the ever-cranky GOP will have an excuse to withdraw their support. Brown will have left himself open to criticism that he’s caved, meanwhile seriously harming his relationship with his labor allies.
If anything, Brown could learn a thing or two from President Barack Obama on this score. Obama, after playing touchy-feeling with Congressional Republicans on a Grand Bargain, is now struggling to fortify his base. Similarly, with his pension package, Brown has decided to risk alienating his base while getting nothing in return from his political enemies.
Indeed, state Senate Republicans will hold a press conference today calling for a special session of the Legislature to tackle the issue of pension envy. Just one example of how potent an issue this has become: the clamoring by Republicans is the reverse of their position two years ago, when now-Senate GOP leader Bob Dutton was among the bulk of Republicans in his caucus who voted against a modest labor-supported measure reducing pension liability.
Nobody will dispute that labor has a fight on its hands to protect retirement security for the state’s public workers from assaults. The latest PPIC and Field polls show strong bipartisan support to rein in pension benefits among all demographic groups — even among public employees themselves.
No wonder. Not a day goes by without a screaming headline about pension abuses. Publishing databases of public workers pensions become a goldmine to drive up click rates for newspaper websites. The “$100,000 Club” — representing less than two percent of the state’s retirees — secures about 98% of media coverage.
Which leaves Brown’s triangulation-happy advisers hoping that labor will simply cave on the issue, give the governor a pass and then hop on board any measures he’ll propose for the November ballot that he views as more important to unions and the Democratic agenda. Central to this reasoning is their reckoning that labor won’t risk a ballot measure that goes even further than what the governor has proposed.
They liken this strategy to 2004 workers comp reforms. As Capitol observers can recall, the Legislature buckled under Gov. Schwarzenegger’s threat of a ballot measure that year that would have been stricter than what labor was able to negotiate. The Democratic legislature grudgingly passed modest tweaks to the state’s worker comp system, averting the ballot initiative.
But let’s take a walk down memory lane.
In 2004, the ballot initiative proposal threat had a champion in a newly-elected popular governor. Schwarzenegger made it his signature issue, stumping up and down the state. There were big bucks behind it, including the full weight of the California Chamber of Commerce. Moderate Dems, under pressure from their own small business allies, didn’t need much convincing to go along with reforms. After all, not a single constituent would likely complain: the changes being proposed wouldn’t have affected the current benefits of a single worker, only impacting future claims.
Compare that to the pension proposals, which will affect millions of Californians with a vested interest in their defeat. Hell hath no fury like a voter who will see his paycheck slashed and retirement put in jeopardy or voters who might be concerned if when they call 9-1-1, that their call is responded to by a 67 year old police officer.
None of the six measures filed thus far reflect Brown’s plan. All of them are more extreme. And the governor didn’t seem too excited about going to the ballot. Clearly, he has bigger fish to fry.
Only one of the measures appears to be semi-serious. Announced last week, it has the backing of former GOP Chairman Duf Sundheim and two Capitol insiders, former Schwarzenegger Finance Director Mike Genest and Dan Pellissier, a former aide to Republican Assemblyman Keith Richman.
These aren’t exactly political heavyweights: Sundheim’s tenure as GOP chair was marked by weak fundraising, the loss of all of the state’s major statewide offices and a decline in the number of legislative seats. Pellissier’s only political experience is a previous anti-pension proposal that died a quick death after it excluded death benefits for widows of police and firefighters; Pellissier also stuffed his benefits before
being fired from* leaving the EPA, including purchasing “airtime.” And Genest is particular vulnerable as a poster child of what’s wrong with the state’s pension system; a Capitol Weekly expose of his $125,549 annual pension noted his final year payout for 2009 was $211,788 after he was paid for unused leave time. His defense? “We could have made a lot more money in the private sector. We are making more money.”
We’ll keep that one handy in our op research file.
On their press conference call last week, the three admitted they’ve raised just $250,000 in the six months they’ve been working on their proposals. And while it’s clearly sympathetic to the union-bashing cause of pension busters, business has zero interest in backing their campaign. Former Secretary of State George Shultz was trotted out to provide stature to the effort (as he was in a press release for a paycheck deception measure a few weeks earlier). Unlike his starring role in Prop 23, where he wasn’t one of the usual suspects supporting action on climate change, Shultz is just another labor-unfriendly Republican whose stature is unlikely to attract dollars.
The Republicans behind this measure seem to be hitching their wagon to a Sugar Daddy in Texan John Arnold, ranked #212 on Fortune’s 2010 list of world billionaires with a net worth of $400 billion. Aside from the fact that Californians have had a long history of rejecting ballot measures financed from Texas interests (e.g.: Valero’s ill-fated Prop 23 last year, T. Boone Pickens’s Prop 10 in 2008), it would be difficult to imagine a more delicious target for a campaign than a hedge fund billionaire from Texas who made a killing screwing Californians by making billions at Enron. Particularly on a Democratic-leaning November 2012 ballot.
There’s a sense that Mr. Arnold is too smart a businessman to pour millions into an effort affiliated with the Three Stooges of pension reform. And fortunately, there’s a gap of about $25 million in campaign contributions between the GOP’s sloppy pension ideas and a voter-approved constitutional provision.
So what should labor do?
Find the third way, charting a course between head-in-the-sand obstruction and rolling over to the governor’s wishes.
So far, unions have avoided the ostrich strategy and are engaged in constructive, money-saving reforms. As a result of concessions made at the bargaining table over the past two years, current state employees, as well as new hires, already have agreed to pay more toward their pensions.
According to the Department of Personnel Administration, the increases vary by bargaining unit, but most state employees’ pension contributions have gone from 5% of their pay to 8%. For correctional officers, it went from 8% to 11%. California Highway Patrol went from 8% to 10%. For assorted groups that include doctors, psychiatric technicians, craft and maintenance workers, and social workers, their pension contributions doubled (from 5% to 10% or from 6% to 11% if they work with inmates.)
That’s on top of furlough days, hiring freezes, layoff threats and increased workloads. And that’s not all. State public employees agreed to reduce the pension formula for new state employees and to changes that curb “spiking.”
At the local level, at least 200 California cities, counties and local districts, firefighters, police, and other public employees have agreed to increase employee pension contributions and lower public costs. These aren’t token giveaways.
They include firefighters, police officers, clerks, traffic workers and many more agreeing to pay more toward their retirements, adding new pension tiers and reducing pension formulas. They include vastly reduced pension benefits for new hires – a move that unfortunately will reduce cities abilities to recruit the best and brightest to protect and serve the public.
Given everything unions have done so far and their willingness to negotiate further, labor would be nuts to roll over and play dead for Gov. Brown.
Steve Maviglio is principal at Forza Communications and a consultant to Californians for Retirement Security.
*”As a gubernatorial appointee, I resigned from the California Environmental Protection Agency on 1/3/11 at the change in Administrations. I was not fired,” Pellissier informed Calbuzz today.
If it wasn’t so tragic, I would find it mildly amusing that NOWHERE in this lengthy article is the impact of these political games on California’s unfunded pension liability even mentioned, which is frustrating because “unfunded liability” is basically just a fancy way of saying that you plan on taking something from future generations.
Look I get it. People were made a promise, and government should have integrity. Yet that promise is unequivocally running into some hard realities (by their own numbers, which many think are very optimistic, CALPERs and CALSTERs have an unfunded liability of about $40-50 B a pop – and that before you even start talking about healthcare and OPEB liabilities).
Let’s be clear: this is a promise that was made on behalf of yet without the consent of future generations. I never agreed to spend my entire working life paying for people to be able to have a 30-40 year retirement. It seems unfair that someone who worked for say 25 years, retires a little after 50, and lives until 85, would have that generous benefit made possible by a young person who will never see a similar benefit themselves.
And that’s what’s so frustrating about these political games. If you take a step back, we face some fairly dramatic structural shifts in terms of demographics (http://www.ppic.org/main/publication_show.asp?i=259), economics (http://techcrunch.com/2011/11/04/the-past-present-and-future-of-connectivity-a-must-see-mini-film/), and really the nature of work (http://www.thedailybeast.com/articles/2009/01/12/the-gig-economy.html). Does it really make sense to think of work anymore as a place you go from 9-5 from 22 to somewhere between 55-65 and then not at all until you die? Well not really. Not when anyone of any age from anywhere in the globe with a broadband connection can add value to society (exhibit A, this blog).
So maybe we need to rethink hard and fast retirement ages. Maybe we need to how public pensions interface with social security and private retirement systems. Maybe we need to rethink how we represent the interests of workers when a rapidly increasing percentage of the workforce doesn’t just have one large, monolithic employer. Maybe we need to rethink California’s tangled regulatory apparatus as it relates to our state’s long run economic competiveness so we have a big enough pie to make good on both our pension promises and our obligations to the next generation. Maybe we need to rethink how we structure our education program and work to prepare our children for an ever-more-rapidly changing world. Maybe we need to rethink how we can provide income security for all parts of the age distribution as we enter a peer-to-peer economy.
That sort of broad, creative discussion about how we can build a new social contract that is fair to all generations of Californians is what the realities of the world we live in demands. That’s what it will take to make good on California (and really America’s) promise that life be better for the next generation.
Or I guess we can take this suggestion and get in a pissing contest about a couple percent of people’s paychecks.
Maybe we need to look at multi-layered retirement plans. I wouldn’t mind a 67-year-old policeman answering my 911 call. But I’d be concerned that a firefighter of a similar age might need to carry me from a burning building. As you say, with a broadband connection, I could keep working for many, many more years. On the other hand, I’m not sure people your age want me to as I’m taking work I’m sure younger people would love to have. It is, as you rightly say, a complex issue with lots of different factors to consider.
Also, though Steve mentions the issue and says unions are addressing it, I’ve long said that getting rid of pension spiking would be the best thing they ever did. Not “curbing” it. Getting rid of it. As he correctly points out, press on those big payouts hurts the union arguments for all members.
The hypocrisy of Republican operatives is never more evident than when it comes to taking advantage of the public pocketbook while at the same time trying to destroy it, kind of a rape and pillage approach that is perfectly in tune with their live for the moment self-centered world view. Not to sound too critical or anything, but these guys are worse than the plague. A pox on them!
…and double pox…chicken pox…
I think given the results of elections last night & the success of the 99%/Occupy Movement, the political tide is turning back in favor of labor. Not completely but significantly. Ohios’ collective bargaining ban was overturned by a huge majority, in San Francisco the voters overwhemingly chose the significantly less painful pension overhaul. Voters will reject these draconian efforts (if they even get qualified & on the ballot) at the Statewide level & labor should negotiate good faith changes with Brown to “tighten up” what they have already given up and nothing more.
“Unfunded liabilities” is a complete function of the timeline used for their computation. I could extend the timeline out to infinity and say their isn’t enough money in the universe to fund these parasites, but that’s just how the deficit mania game is played on an unsuspecting and uncritical public. If, for example, congress DID NOTHING the deficit would disappear in something like 15-20 years. Medicare has been predicated to go bankrupt any number ot fimes – here’s a handy reference:
Certainly there is plenty that can be done to restore sanity to some of the payout schemes, but these represent a pitiful percentage of the whole picture even though they are always presented as the poster child for the “problem”. Medical costs will be well-constrained by a suitably designed single-payer system (I say “will” because this outcome is inevitable – it’s just a matter of when). What is needed here is science and not hysteria, and most importantly politicians who are willing to govern and not be constrained by ideological and mean-spirited edicts like “no new taxes”.