Public Pensions: Reform, Repair, Reboot

Jerry Brown.jpg

Ill-informed chatter continues to dominate the airwaves when it comes to California public pensions. It’s a big, complex and critical issue for government at all levels in the Golden State. What makes debate so distorted is that public pensions actually differ from agency to agency — and advocates on the issue often talk past each other. Pension critics often point to outrageous abuses as if they were typical. On the other hand, pension defenders often cite current averages that understate long-term costs. All this fuels the typical partisan gridlock that Californians lament yet seem powerless to change in our state.

Credit Governor Jerry Brown for trying to overcome the polarization. That’s what most California voters want him to do, according to a new Field Poll, one of the leading opinion research firms in California. His 12-point pension package (unveiled in October) is successfully framing the debate — and enjoys encouraging support from voters. I agree with them. While Brown’s plan is far from perfect (as he acknowledged in presenting it as a way to build consensus) it sensibly tackles some of the most challenging areas where reform is needed. Among the key reforms he’s proposed:

  • Increasing the retirement age from 55 to 67 (with a lower age to be spelled out for public safety workers).
  • Replacing the current “defined benefit” pensions with a hybrid program that includes a defined benefit component, but also a 401(k)-like defined contribution component
  • Prohibiting retroactive pension increases.
  • Requiring all employees to contribute at least 50 percent of the cost of their pensions

These generally follow the surprisingly strong stand taken by the League of California Cities, which was based on recommendations from a committee of City Managers that I served on. Our work was grounded in four core principles:

  1. Public retirement systems are useful in attracting and retaining high-performing public employees to design and deliver vital public services to local communities;
  2. Sustainable and dependable employer-provided defined benefits plans for career employees, supplemented with other retirement options including personal savings, have proven successful over many decades in California;
  3. Public pension costs should be shared by employees and employers (taxpayers) alike; and
  4. Such programs should be portable across all public agencies to sustain a competent cadre of California public servants.

Our goal was to ensure the public pension system is reformed, instead of destroyed. Our reform package mirrors Brown’s calls for a hybrid system, raising retirement ages and increasing the portion of pension costs borne by employees. We also backed his bid to base retirements on the top three highest years of pay, curbing the abuses that often artificially raise final year salaries to “spike” pension pay-outs.

Typical of California’s other challenges, the issue faces long odds in the Legislature and uncertain fate at the ballot box. Partisan Democrats are leery of crossing unions by embracing Brown’s package. Partisan Republicans are demanding more far-reaching changes. Brown hopes to bridge the differences to win majority support by drawing on moderates in both parties. “He hasn’t riled up one side or the other,” noted Field Poll director Mark DiCamillo. “He’s managed to strike the middle ground on a very polarizing issue.” Unfortunately, moderates are hard to find in Sacramento.

That leaves the roll of the dice that comes with ballot initiatives. Since it takes millions to bankroll a successful ballot measure, few sensible measures get far without support from well-heeled interests.

In the eternal game of chicken that goes on in Sacramento, the Legislature keeps one eye on those special interests. About the only hope for reform is if a majority is worried that failure to act might spur an expensive ballot box war and an even worse outcome.

This issue might be the exception, however. Public outrage is real. So is the need for reform. In Ventura, we took an early lead on this issue, first with our Compensation Policies Task Force, then union contracts that established a lower benefit and later retirement age for new hires and increased contributions from all employees of at least 4.5% of their pay. But real reform to level the playing field can only come at the State level.

Before this issue devolves into another ballot box catastrophe that radically oversimplifies the issues to a “yes” or “no” choice on an initiative bankrolled by special interests, legislators in both parties need to come together on sensible reform. The Governor has put such a program on their desks. Reasonable people can differ on the details. But only unreasonable people want all-or-nothing victories. This is an issue that both sides should be willing to compromise on. The only way that will happen is if voters push both parties toward sensible compromise in the year ahead!

Photo by Randy Bayne

Rick Cole is city manager of Ventura, California, and recipient of the Municipal Management Association of Southern California's Excellence in Government Award. He can be reached at RCole@ci.ventura.ca.us



















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Hmmm...

From what I've seen of Jerry Brown, he will not do anything the unions don't like. He is owned lock, stock and barrel by them.

I moved away from the state last year and I'm not sorry, although I miss my friends in Fresno.