Pension give and take

Reforms must happen, but it doesn't have to be an all-or-nothing approach

A group of Democratic and Republican mayors are proposing a ballot initiative to dramatically alter public pensions.

That public pensions must be modified is clear. Many public agencies are strangling under the weight of pension costs.

"Skyrocketing retirement costs are crowding out funding for essential public services and pushing cities, counties and other government agencies closer to insolvency," said San Jose Mayor Chuck Reed, the point-man on the new effort.

Indeed, many opponents of Stockton's Measures A and B on the Nov. 5 ballot complain that the city should have challenged the state's giant California Public Employees Retirement System. They complain that a too-generous retirement and benefits package was one of the main drivers sending the city into bankruptcy court.

Certainly that did not help, but neither did collapsing revenues because of the real estate meltdown nor debt obligations stemming from the city's outlandishly ambitious downtown renovation program.

Still, few can argue against public pension reforms. Government agencies - and that means the taxpayers - at all levels face unfunded pension obligations that total in the tens of billions of dollars.

The plan San Jose's Reed and others propose would allow public agencies to dramatically reduce retirement benefits for not just future workers but also current workers.

And therein lies the rub, certainly from the standpoint of the workers, their unions and Gov. Jerry Brown. In supporting statewide pension changes last year, Brown backed away from going after the pensions of current employees. The courts, he said, have consistently ruled that such curbs are not legal.

Workers are sure to frame the coming fight that way.

What Reed and the others propose "breaks the promise of a secure retirement made to millions of Californians, many of whom are ineligible for Social Security and have an average pension of $26,000 per year," said Dave Low, chairman of Californians for Retirement Security.

"It will allow public employers to unilaterally cut the retirement benefits ... a promise upheld by the Supreme Court that politicians and hedge fund managers want to change to allow employers to renege on it."

Reed last year led the fight for pension reform in San Jose that voters approved overwhelmingly but which has been challenged in court by unions.

The San Jose reform plan forces city workers to choose a less-generous retirement plan for future service or contribute more money to continue their more generous pension. The plan didn't change benefits workers had accrued.

That change is not unlike what private sector workers have faced again and again. In many cases, pensions they were told would be there were simply frozen.

Public workers understand that, but they say that taxpayers need to understand that workers in the private sector have Social Security, a safety net denied many in the public sector such as California public school teachers.

What Reed proposes now is a change to the state Constitution giving state and local government employers the right to lower current workers' pension and retiree health benefits prospectively.

Most legal experts have concluded that the state Constitution protects pensions promised workers on their first day on the job as a "vested right" that can't be cut without comparable compensation in return.

Reed has a long way to go before this gets before the voters, especially in terms of finding financial backers. He already is said to have asked for funds from a Houston-based nonprofit with ties to former Enron executive John Arnold.

To many Californians, and not just public employees and their unions, out-of-state money flooding into this state's political campaigns raises their hackles. The irritation likely will be even higher about money in any way tied to Enron, with its history of diddling in the state's energy markets a decade ago.

Middle ground - hard to find in a labor-management dispute - is what's needed. A unilateral attack on pension promises seem unfair, but it also seems unfair for taxpayers to shoulder the entire costs of public pensions.

Short of finding that elusive middle ground, a measure such as Reed's or one like it eventually will find itself before voters.

Stockton City Manager Bob Deis defends the city's decision not to take on CalPERS as part of the bankruptcy process. It would be expensive and divert attention from the things that need to be done to get out of bankruptcy.

That's a reasonable argument. It's also reasonable to suggest that pension reform should be attacked statewide. The Legislature made a half-baked start last year. Reed's initiative may go too far, but it does show that we have much further to go before we achieve fairness for public workers and the taxpayers.

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