Pension reform proposal draws unions’ ire
A Nevada County union representative decried a brewing ballot initiative that would amend the state’s constitution to allow local governments to negotiate changes in pension benefits for current and future employees.
“I would be surprised, if the legal avenue were there, if there weren’t public agencies in every part of the state that wouldn’t take a look at that,” said Clayton Thomas, vice president of the Nevada County Professional Firefighters union.
The initiative would allow cities to scale back future pension benefits for current employees through union bargaining or by taking reforms to local voters. The proposal would not allow cities to touch benefits that current employees have already accrued, according to San Jose Mayor Chuck Reed.
“It is a Pandora’s box,” Thomas said. “ When you open it once, you will never be able to close it, and the retirement system will be no better than a 401(K) when it is all said and done.”
Mayors of five California cities — San Jose, Anaheim, Santa Ana, San Bernardino and Pacific Grove — filed papers in mid-October with the state to place an initiative on next year’s ballot.
A number of cities, including Grass Valley and Nevada City, have already sought to lessen their pension obligations by reducing pension benefits for future hires — but that isn’t enough, said San Jose Mayor Chuck Reed.
“If you’re making changes for future hires, the savings are way in the future. It takes years, many years, before the savings get to be significant, but the problems are in the present and in the near future,” said Reed, who added that San Jose’s annual retirement obligations have increased $199 million since 2003. “You have to go where the significant costs are, and that’s with current employees.”
The five mayors’ plan was swiftly denounced by public employee unions and drew resistance from the California Public Employees’ Retirement System, which administers pension benefits for the state’s public employees. The proposal breaks a promise made to public employees — including teachers, firefighters and police officers — when they were hired and attacks the so-called “vested rights” that are an integral part of the pension guarantee, said Steven Maviglio, a spokesman for Californians for Retirement Security, which represents 1.6 million public employees.
“This is pretty extreme,” he said. “The kitchen sink and everything in the house will be thrown into this battle because not only does it undermine the retirement of a couple million Californians, but it also sets a terrible precedent for the future of collective bargain in the state.”
During boom years in California, cities and local governments padded their public employee contracts with increased pension benefits, but the recession brought the reality of soaring retirement obligations home. In many cases, public employees can retire at age 50 and receive a guaranteed pension worth 90 percent of their highest annual salary.
Tim Ewing, president of the Nevada City Police Officers Association, characterized the proposal as similar to buying a vehicle, only to come back to the dealership three years later to say, “I could have gotten a better deal” and asking the state to force the salesman to comply.
“You don’t bargain for something and then come back and say we found a way to undermine good-faith bargains,” Ewing said. “If agencies want to lower your pension rate, bring that up in bargaining. The way I look at it is that it is a back door way of screwing over your employees.”
Nevada County’s various public agencies are not immune to budgetary woes.
In March 2012, Nevada County Consolidated Fire District put forth a special election to implement a fire tax that amounted to $52 for most property owners. Fire Chief Tim Fike said the special tax was needed because the district was operating at a $500,000 deficit and faced an approximately $870,000 deficit for the 2011-12 fiscal year. He warned a failure to pass the tax would mean a 20 percent reduction in personnel and the permanent closure of two fire stations. A vast majority of voters — 68.5 percent — approved the tax.
Grass Valley and Nevada City also subsequently went to voters asking for revenue increases. Between 2008 and 2012, Grass Valley’s more than $10 million general fund lost about $1.5 million and Nevada City lost $487,000. In November 2012, voters in both towns approved sales tax increases to prop of up city finances. Unlike the fire district, the two towns’ taxes are temporary, set to expire after 10 years in Grass Valley and five years in Nevada City.
Both cities have also employed the practice of hiring part-time retirees, who already collect pensions, into key department positions as a way of cutting costs and avoiding benefit contributions. But CalPERS has cracked down on that tactic. In Nevada City, former Police Chief Jim Wickham, an annuitant, re-retired at the end of September, and City Manager David Brennan is eyeing an early 2014 exit, he told The Union. Grass Valley’s former Interim Fire Chief Tony Clarabut, another annuitant, also recently stepped down.
“(Cal)PERS hasn’t dealt with the retired annuitant issue, which basically drains new employees from entering the system,” Thomas said. “But they are starting to cover that.”
Retirement costs have contributed to bankruptcies in three cities — Stockton, Vallejo and San Bernardino — in recent years. Cities like Grass Valley and Nevada City have created two-tiered benefit models so that new hires get lower percentage pension contributions with later retirement ages than people already on the books.
“While this is a good start, going forward, the city will need to look at their other bargaining groups and work toward more sustainable pension plans,” said Interim Grass Valley City Manager Jeffrey Foltz, himself an annuitant, in an email to The Union Friday.
In California, citizen-generated initiatives that gather enough signatures qualify for the ballot and can be voted into law. The pension initiative needs more than 800,000 petition signatures to qualify for the ballot, and opponents have promised to fight hard to keep it from becoming law.
“It is their way of saying they aren’t doing their jobs and trying to blame it on someone else,” Thomas said of the proposed initiative.
“It is shifting responsibility of the bad decision making from elected officials and managers of these agencies off onto the employees, when it isn’t the employees who made the mistake with the budget,” added Wyatt Howell, president of Nevada County Professional Firefighters union.
One of the biggest problems, Howell said, is that the public is not completely aware of how collective bargaining transpires. “More importantly, they aren’t looking at the jobs they are asking law enforcement and firefighters to do. These guys lay their lives on the line so the rest of us can sleep peacefully at night,” Howell said. “That safety comes at a price, and that price is the abuse to their bodies. Yes, we all agree to take on that risk when we sign on. But don’t you think it is right to take care of the people who spend 30 years laying their lives on the line for the community?”
The Associated Press’ Gillian Flaccus contributed to this report. To contact Staff Writer Christopher Rosacker, email firstname.lastname@example.org or call 530-477-4236.
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