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Monday, January 24, 2011

Brown's Need for Tax Extension Could Lead to High Tension on Pension

From time to time, yours truly has noted that a public pension proposition on the ballot could override the Regents’ action last December, unless it explicitly exempted UC. It is possible there could be a proposition related to pensions as early as June.

Such a proposition would not be an initiative, i.e., a proposition put on the ballot by voter petition. There is not enough time to go the initiative route. However, Jerry Brown needs to get his tax extension on the ballot by June and he needs the legislature to put it there (since, again, there is no time for an initiative).

Normally, a 2/3 vote would be needed for the legislature to put a proposition on the ballot. But without Republican votes, he does not have 2/3. There has been a proposal that it could be done by a simple majority. But there might be legal challenges and if there were, the process could be fatally delayed. As a result, Republicans have been mulling over what kind of a deal they would require to provide the 2/3. Leaks of such mulling (trial balloons?) have been appearing in the press. And one idea is a pension proposition. See below:

GOP senator: No pension reform, no vote on taxes

Steven Harmon, Contra Costa Times, 1-23-11

SACRAMENTO -- Republicans have yet to emerge with an official set of demands they'd want met before considering Gov. Jerry Brown's budget proposal, but pension reform will top the list once they do. Sen. Mimi Walters, R-Laguna Hills, is preparing a package of pension reform bills she said must be addressed before taking up taxes. Among her reforms is legislation requiring all new state employees to enter 401(k)-style benefit plans.

"We want reforms in place before there's any discussion about tax increases," said Walters, the GOP's nominee in the fall for state treasurer who was trounced by incumbent Bill Lockyer. "I do know there's not support at all to even put it on the ballot without significant pension reforms."

…Brown said last week he intends to unveil his own pension proposal "in the coming weeks," but does not want to tie it to budget negotiations with Republicans.

…Though pension reform may help attract Republican support, it could be vital to Brown's hopes of gaining voter approval for his tax extension, said Marcia Fritz, a public accountant and president of the California Foundation for Fiscal Responsibility. "If Brown doesn't show real reform, not just a little, I think his (tax plan) is dead," said Fritz, a Democrat who said she voted for Brown. "Just calling for taxes and keeping the pension problem unresolved is madness. I think the two go hand in hand."

…Still, most of the large public employee labor organizations have agreed to contracts in which they rolled back previous gains, and have said they are willing to look at more changes. But coupling pension reform with the budget is a nonstarter for them.

…Typical Democratic turnout advantages over Republicans in California disappear in special elections, political observers say, primarily because there is no major party candidate at the top of the ticket. And Republicans come out in larger force on fights over taxes… Fritz, the pension reform advocate, doesn't agree with a straight 401(k)-style pension, but said there are several easy fixes that would start to cut into the costs. She has sought meetings with Brown but has not heard back from him…

Full article at http://www.contracostatimes.com/top-stories/ci_17163855

By the way, grumbling in California about defined-benefit pensions has now spilled over into the private sector. Yours truly does a blog for a group called the Employment Relations Research Network. See

http://employmentpolicy.org/sites/eprn.cloud.ojctech.com/files/MitchellMusings1-24-11.pdf

video

UPDATE: More on the politics of pensions at http://calpensions.com/2011/01/24/public-employees-the-new-welfare-queens/

UPDATE: The notion that public pension promises are ironclad is - not surprisingly - now being subject to scrutiny and questioning. Yours truly cannot evaluate the legal points but here is an example: http://www.seethebenefits.com/showarticle.aspx?Show=4462

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