Op Ed: Pensions Need Real Reform, Not Rhetoric


Senior couple paying billsBy Chuck Reed
Special to Calbuzz

One of the main reasons our politics are so dysfunctional is that each side spends a ton of money on focus groups and polling to figure out how they can make their opponents look bad. Then, regardless of the facts, these same groups spend millions repeating those poll-tested charges, turning their opponent into some kind of villain.  Solutions to fix the problem are rarely discussed, much less acted upon.

Mayors cannot afford to engage in the politics of dysfunction. Our constituents face real problems and it is our responsibility to come up with real solutions. We have a responsibility to keep our citizens safe, to ensure our children get the education they need and to provide the essential services on which our residents rely.  However, the skyrocketing cost of government employee retirement benefits is impairing our ability to meet these responsibilities.

Pension-IOUOf equal concern to mayors is the fact that that growing pension costs are also having a major impact on our current government employees. As a growing percentage of our budgets goes toward pensions, cities have been forced to lay off loyal, effective workers and cut their salaries. If we are not able to get our retirement costs under control, the layoffs and the salary reductions will continue and the quality of the services that we provide our community, which includes our hard-working government employees, will continue to deteriorate.

That’s why I have joined a group of California mayors in authoring a pension reform initiative that would provide state and local governments with the tools necessary to control their unsustainable retirement costs.

Unfortunately, our opponents have decided to follow the dysfunction playbook: “deny, mischaracterize, and attack.”

First, they claim there is not a problem. Yet the largest pension system in California (CalPERS) recently indicated that California taxpayers will see their annual pension contributions jump by 50% over the next six or seven years. These increases will eat up the growth in revenues that we hope to see, further strain government budgets and services, and push more government agencies closer to the edge.

calstrsEven more shocking, many leaders of our government employee unions show little concern about the significant underfunding in our state pension systems. In particular, the Legislative Analyst’s Office has stated that the state teachers’ pension fund (CalSTRS) is currently scheduled to run out of funds in 30 years, meaning new teachers who are contributing their hard earned money into the system are at risk of not receiving their pensions when they retire. The situation keeps getting worse, and CalSTRS recently reported that its unfunded liabilities are growing at the astonishing rate of $22 million per day!

The problem deniers then claim the initiative “gives local elected officials the power to break their promises to public employees” and allows for “unilateral” changes to retirement benefits. Nothing could be further from the truth. The initiative specifically protects all benefits that are earned as work is performed, while simply allowing for changes to future benefits when circumstances dictate. Furthermore, any such changes must comply with applicable collective bargaining rules. Read exactly what is in the pension reform initiative

Finally, our opponents try to attack the initiative as some sort of right-wing conspiracy. Such nonsense ignores the facts that: four of our five proponents are Democratic leaders of Democratic-majority cities; polls consistently show that Democrats, Republicans and independents all support the need for pension reform; and the donations that we’ve received (which have only been for the initial policy work) have come from people across the political spectrum.

People support pension reform not because they are part of some ideological struggle.  People of all political stripes support reform because they understand that this is simply a math problem with potentially disastrous consequences.

We have an obligation, to both our residents and our public servants, to fix this problem now before we see more cities, counties and government agencies slip into insolvency.  The last thing we want is for our retired public servants to lose their accrued benefits when they are counting on them the most (as has happened in the bankrupt cities of Stockton, Central Falls, RI, and verChuckReed_r620x349y possibly Detroit).  This initiative provides the tools we need to ensure we can pay our employees the benefits they earn, without gutting essential services or placing unbearable burdens on our taxpayers.

The politics of dysfunction are easy. Finding real solutions to serious problems is hard. Let’s make this an example of how we can rise above the politics of dysfunction and achieve a fair and reasonable solution for the benefit of all Californians.

Chuck Reed is the mayor of San Jose. His article is a response to an op-ed from Steve Maviglio posted last week on Calbuzz.

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There are 7 comments for this post

  1. avatar thetruthsquad says:

    It’s unfortunate Mayor Reed doesn’t understand what’s in his own initiative and seems ignorant of what’s going on the state all around him: Mayors are putting politics aside and addressing the pension issue.

    First, Mayor Reed, has grand total of 3 other Mayors supporting his effort. One of them, the Democratic Mayor of Santa Ana, no longer is one of the proponents on the measure, largely because he, figured out that it is flawed, poorly drafted, and breaks promises made to firefighters, police officers, and teachers.

    Secondly, in more than 380 jurisdictions across the state, Mayors with leadership skills have sat down across the bargaining table and figured out ways to address their pension challenges. Mayor Reed, on the other hand, has spent nearly three years bashing city employees and plans on spending $5 million of San Jose taxpayer dollars defining a ballot measure that will likely be found unconstitutional. If Mayor Reed truly wants results and not rhetoric, he’d sit down and do what 99% of the state’s mayors have done. Instead, he’s more interested in bashing public workers — which is one reason they are leaving the workforce in droves.

    In addition, Mayor Reed once again manufactures numbers here that have no foundation in the truth. It’s one of the reason why investigative journalists at the NBC affiliate have repeatedly noted Mr. Reed’s inability to be honest — whether its been the size of the city’s budget challenges or even crime statistics.

    As for the ballot measure, this is what it does:

    • Repeals vested rights of public employees and allows government employers to cut, change or eliminate retirement benefits and/or retiree healthcare benefits of current employees on a prospective basis.
    • Removes PERB authority and jurisdiction over all retirement and retiree healthcare issues under this Act. Provides that the courts shall have exclusive jurisdiction of retirement and retiree health care matters covered under the Act.
    • Provides that a labor agreement executed within 12 months before the effective date of this Act that is inconsistent with the Act shall be deemed invalid.
    • Provides that there is a rebuttable presumption that any labor agreement renewed or extended more than 6 months before its expiration date, during the 12 month period before the effective date of this Act, was entered into for the purpose of violating the Act and shall be deemed invalid.
    • Provides that a government employer that finds its pension or retiree health care plan is substantially underfunded and is at risk of not having sufficient funds to pay benefits to retiree or future retirees, or declares a fiscal emergency because the financial condition impairs the ability to provide essential government services or to protect the vital interests of the community, the government employer shall have the authority to implement one or more of the following actions:
    1. Reduce the rate of accrual for pension or retiree healthcare benefits to be earned in the future.
    2. Reduce the rate of cost of living adjustments for pension or retiree healthcare benefits to be made in the future.
    3. Increase the retirement age for payment of pension or retiree healthcare benefits to be earned in the future.
    4. Require employees to pay a larger share of the cost of pension or retiree healthcare benefits.
    5. Other reductions or modifications of pension or retiree healthcare benefits agree upon during collective bargaining.

    Broken promises, you bet.

    Now perhaps Mr. Reed can come clean with CalBuzz and California voters about his connections to Texas billionaire John Arnold, who is funding this “solution” since he once again is evasive in this column.

  2. avatar smoker1 says:

    There is a strong similarity between the global warming deniers and the pension crisis deniers. In both cases, there are some very bad consequences that we can see coming. In the case of global warming, energy companies, big ag and other monied interests sow the seeds of doubt and inflate the costs of change. In the case of the pension crisis, it is public employee unions that refuse to take on the challenges ahead. Since public employee unions are the primary ATM for Democratic campaigns, Mayor Reed will find nothing from Democrats. Republicans are essentially zero, so it doesn’t matter much what they think. Mayor Reed has identified a very real problem and a very reasonable solution. I hope that is enough.

    • avatar ReilleyFan says:

      The unions have agreed from day one to do all these changes for the newly-hired. All they ask is that you not break decades-old promises to existing workers made in lieu of pay raises after workers have past the age/ability to make alternate plans.

    • avatar thetruthsquad says:

      What part of the 538+ renegotiated deals do you not understand? Unions understand the challenges; their jobs depend on it. What they don’t get is being scapegoated for the bad decisions that politicians like Reed have made to get their communities in such a mess.

  3. avatar ReilleyFan says:

    Chuck Reed voted as a City Councilman for these very pensions he decries.

    Chuck Reed gets a pension & conveniently wont have his pension affected.

    Chuck Reed failed as Mayor of San Jose and now wants to blame workers & pensions for his failure.

    Chuck Reed doesnt understand the legal principle of “Promissory Estoppel.”

    You have to be a real evil person to promise something for decades and then right when someone is a senior and cant work or change their plans, you violate your promise and leave some little old lady ex-secretary out on the street.

    This is wrong for Social Security on the National level and it’s wrong with earned pension at the local level.

  4. avatar straighttalk says:

    This dance is getting repetitive and non-productive. Reed wants to change long-standing Ca law which he knows full well was the reliance basis upon which the Ca govt employees signed on to their current jobs. The Ca govt employees know full well that when they signed on to those jobs they were expecting to receive less than market pay in return for a sweet pension benefit. In the intervening years and with the strength of govt labor unions those employees now have both market rate current pay, and unsustainable (and not available to those in the private sector that still have pensions as part of comp) pension formulas, including sweetners in terms of final pay and vacation time comp etc, which further boost their pension benefits. Reed wants to change Ca law; the employees want to keep both their current market salaries/pay and their unsustainable pension frameworks (plus post retirement health-care). Neither can expect to have what they want.

    Let’s approach this as adults. Reed, back off and honor the expectation interest of those existing employees. Do a pv total comp study and compare it to market comparable total comp in the private sector. Set total comp standards for new hires at market comps (and demand that they perform at market standards or send them packing like the real world would do). As for the existing employees, you know you are at way in excess of market total comp on a present value basis factoring in your expected pension benefits and health care. Since you don’t want to realign your pension/post retirement health to a sustainable level, fine. That means that the other part of your total comp–your current pay- is the only lever available for adjusting your unsustainable total comp package. If that is all you leave us as citizens to work with, then so be it. You should now assume that your pay will be frozen at current levels until the present value total comp package returns to alignment with the market. You don’t like the fact that you don’t want to give up future pay increases and thus get frozen in current time, well that’s too bad. We work on the simple principle that, at most, you get market relevant present value total comp packages (and again have to perform at that level every day as well). It is your choice to decide to accept a larger deferred comp balance in the current pay/future pension split. But recognize that your decision in turn forces us to freeze your current pay. You don’t like it, resign and go to the market and take your chances, (but thus cutting off your accrual of the sweet future benefit). You want to threaten worker strikes? Try it and see how far you get. You want to just keep playing this game and stalling while the crisis creeps up on society, well, be prepared to have more empty desks next to you and more work on your desks.

    Reed, you need to back off on tanking the pension promise that was the expectation basis for these employees to take the govt route to begin with years ago. That is the decent thing for you to do. There is no reason you can’t accomplish what you want in the long run by just holding firm on the principle that government employees do not deserve total compensation (on a present value determined basis) that is greater than that being paid to private sector employees performing comparable jobs requiring comparable skills and levels of service. It is way past time to start having some straight talk here by both sides. As a citizen I think I am entitled to expect that.

  5. avatar ETSmokeyBear says:

    Mayor Caught lying again, by NBC News. Watch video where Mayor runs away as NBC trys to talk to him about another lie. Anyone listening to this guy is idiot. This time about crime stats, that the Mayor changed to make it look like crime is down. http://www.nbcbayarea.com/investigations/San-Jose-Police-Gang-Crime-Statistics-Explain-the-Numbers-231968991.html

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