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Op Ed: Reed’s Anti-Pension Drive Enrages Labor

Nov11

chuckreedBy Steve Maviglio
Special to Calbuzz

Nearly three weeks ago, San Jose Mayor Chuck Reed announced he was taking steps to put a measure on the November 2014 ballot to give local politicians the power to break their promises to teachers, firefighters, police officers and other public employees to provide them with a secure retirement.

Reed, a Democrat, chose a telling venue for the launch of his initiative: Stanford University’s Hoover Institution, whose mission, notes RightWingWatch.com, is “Forging strong ties between right-wing ideologues, right-wing think tanks and right-wing policy makers.”

Reed spent the next 35 minutes union-bashing from a TelePrompter, outlying his plans for a statewide ballot measure. So it was no surprise that at the conclusion of his remarks, an audience member piped up and bluntly told Reed: “I’d like to offer you the opportunity to become a Republican.”

Two weeks later, when Reed officially filed his request for a title and summary with the Attorney General, rolling out “The Pension Reform Act,” it was all about being a progressive.  He framed the measure as a quest to save social services at the local level. Three Democratic mayors joined him in the rollout, along with one Republican.

greenhut_t940_1_r640x375Conservative San Diego Union-Tribune columnist Steven Greenhut could hardly contain himself. “Progressives for Pension Reform” and “Democratic Mayors Lead Pension Reform Effort” were the headlines on two of his pieces. The state’s leading conservative papers chimed in as well with fawning editorials noting a rift in Democratic ranks.

Actual Democrats are Opposed: But alas, there is no rift. Right out of the gate, the state’s leading Democrats blasted the proposal. And aside from Reed himself, not a single big city mayor – Democrat or Republican — joined Reed’s effort. In fact, one of the Democratic mayors that Reed initially had on board is expected to renounce his support this week.

One of the reasons – and perhaps Reed’s biggest dilemma – is that the only money behind the measure is likely to come from right-wing ideologues.  The state’s business community has little interest in changing the pensions of public employees (after all, they  don’t affect the private sector). And the smart money in the state sees it as a sure loser.

Reed won’t say where he’ll get his money from. But the fingerprints of right-wing and Wall Street money already have stained the measure.

Last week, Inside San Jose exposed a $200,000 payment made at the behest of Reed to lay the groundwork for the ballot measure from a Texas-based group. “I’m not going to reveal names, because they’ll end up in your newspaper and people might cause trouble for them,” Reed told the website’s reporter.

taibbiDark and Stormy Money: Shedding light on Reed’s dark money, the reporter tracked it to John Arnold. Described by Rolling Stone writer Matt Taibbi as “a dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation’s Koch brothers,” Arnold is a Texas billionaire who made his money at Enron.

Needless to say, the thought of Reed’s pension measure being funded by an Enron trader who screwed California during the energy crisis – and who robbed Enron’s employees and tens of thousands of stockholders of their retirement savings – gives Reed’s opponents a Big. Fat. Target.

Reed’s only other reported behests also will give opponents ammunition: $50,000 from former LA Mayor Richard Riordan (who recently abandoned a pension measure in his city after union pressure)

Reed hasn’t decided whether he’ll try to put the measure on the ballot. “Whether it’s 2014 or 2016 is really a political call.”

Privately, leading Republicans are having heartache about putting it on the 2014 ballot.  With what’s shaping up as a lackluster gubernatorial race, they’re counting on a low, targeted turnout to pick up seats in the Legislature and deny Democrats their supermajority.

The thought of unions launching a full-scale organizing war around this ballot measure – where the maviglio-election-talent-web-photospensions of nearly three million public employees stand to be slashed – is probably making GOP Chairman Jim Brulte lose sleep at night. He knows that labor will throw the kitchen sink – and everything else in the house – into this battle, just as they did in their successful Prop 32 fight in 2012.

Steve Maviglio, former press secretary for Gov. Gray Davis and principal at Forza Communications, is spokesperson for Californians for Retirement Security.


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There are 4 comments for this post

  1. avatar patwater says:

    Re: “the power to break their promises”

    Good sir,

    What about the promise to steward public resources for the next generation?

    Pension “reform” in this state largely has succeeded in denying status quo benefits for new employees. And call me a young turk or whatever, but for my generation to spend our whole lives paying taxes for benefits we have been systemically denied seems like a shitty social contract.

    And yes the fact of the matter is that California’s pension are still underfunded, meaning that the taxpayer (aka us young folks since we’re talking decades) is on the hook unless employees pay still more or benefits are rolled back.This is post-Governor Brown’s reform (something he stated over and over again was only a starting point).

    But don’t take my word for it. Check out any of California pension systems’ own audited financials.

    Investment Total ($ in millions
    Return Funded Required
    Assumption Ratio UAAL Contribution UAAL
    5.00% 50% $ 142,485 56.087% $146,375
    6.00% 57% $ 106,249 44.927% $110,139
    7.00% 65% $ 76,733 35.629% $ 80,623
    7.50% 69% $ 63,840 31.413% $ 67,730
    7.75% 71% $ 57,868 29.471% $ 61,758
    8.00% 73% $ 52,200 27.528% $ 56,090
    Source: p 34 Calstrs 2012 CAFR http://www.calstrs.com/sites/main/files/file-attachments/financial.pdf

    So at an optimistic assumption of an 8% return, according to CALSTRs own audit, we’re putting a burden of $56 billion on the next generation. That number goes exponentially upward the further we fall from an 8% return. And then there’s CALPERs and and all other pension systems.

    You can toss around all the ideological labels you want — but you can’t change that math.

    So if not Reed’s proposal, how do we tackle our pension challenges and respect intergenerational equity?

    Cheers

  2. avatar thetruthsquad says:

    Congratulations, young turk, for buying into the bogus rhetoric of the right (and their math). CalPERS is in better shape today than it was when Jerry Brown was Governor in the 70′s. The 7.25% CalPERS uses isn’t optimistic — it’s the reality over the past 20 years.

    I wonder if you own a house. Because if you do, you’d get a monthly statement that says how much you owe. Could you pay it off right now? Unlikely. That’s just like the notion of “unfunded liability.” And according to the financial markets, CalPERS is in healthy shape. The folks who attack it manufacture numbers based on their numbers in the Great Recession. Since then, CalPERS has regained all of those losses — quite the achievement.

    You call the benefits that current and public employees “status quo” is laughable. Have you checked out the private sector? Benefits are being eliminated left and right. And who is going to pay for private sector workers who can’t pay for their retirement? You guessed it, the California taxpayer.

    There’s a retirement crisis in this state. Eliminating benefits for teachers, firefighters, school employees and other public employees who made a career choice to serve us in the middle of their careers isn’t fair, and it isn’t right.

  3. avatar patwater says:

    @thetruthsquad,

    Thanks for the opportunity to engage.

    The driving math is pretty simple though. As the Governor said, “Three times as many people are retiring as are entering the workforce. That arithmetic doesn’t add up.” Nothing has changed that dynamic.

    Also look at other 20 year slices of history (or just the 10 year slice from 2000-2010) to complicate your assumed rate of return issue: http://www.ritholtz.com/blog/wp-content/uploads/2011/01/Real-Long_term-US-Stock-Growth.png

    More deeply, here’s a smart take that debunks myths (from both the right and the left) that a former colleague wrote: http://www.governing.com/columns/public-money/col-Pension-Puffery.html

    Highly recommended.

    Cheers,

    Patrick

  4. avatar erikbruvold says:

    Actually, Truthsquad that analogy is incorrect. The Unfunded Liability (if you are talking about the UAL) expresses the ratio between the actuarial liability and the actuarial value of the assets. This is likely to fluctuate but a funding ratio of 70% at expected rate of return of 7.25% will mean that CALPERS, in some combination, has to exceed 7.25%, increase contribution rates from members/employers, or have favorable actuarial outcomes that deviate from assumptions (such as people working longer or dying earlier, etc. etc.).

    One of the real problems in this debate is that NEITHER side is very honest with the public because it is dry, complicated, and BORING. Plus it is a problem that lies 20-30-40 years off. Reed’s proposal is likely not the answer – but neither is doing nothing or creating 2 tier systems.

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