Curtain Lifted on Pension Initiative

Prior posts have alerted readers of this blog to a forthcoming public pension initiative.  The group that has been working on the initiative seems to have money for a campaign.  It takes $1-$2 million for signature gathering firms to get an initiative on the ballot.  If an initiative is controversial, it may take loads more money for TV advertising to mount a campaign.

The initiative explicitly covers UC.  It has some ambiguous elements which we hope to unscramble.  Government employers are given the power to modify pensions and retiree health plans going forward for incumbent employees.  Note that the 2010 Regents changes to the UC pension involved only new hires who were put in a second tier.  If a group is covered by collective bargaining and the union and management don't agree on a change in a limited period, the employer is empowered to make the changes unilaterally.

The authority to make changes seems linked to a finding of significant underfunding.  There is language about less than 80% funding being the criterion.  Note that the UC pension is currently below 80%.  Where there is less than 80% funding, a plan is supposed to be drawn up that remedies the problem in 15 years.  Note that the UC plan involves 30 years.  Note further that in the UC case, and in many cases, retiree health care is not pre-funded at all.

So the issue is whether a government employer must take action or can take action.  If "must" is what is intended, the Regents would have to do something about their current pension solution.  And presumably they would have to set up a pre-funding plan for retiree health that gets to full funding in 15 years.

If it isn't required that a government employer establish such policies, then presumably the Regents could leave things as they are, i.e., not exercise their authority.  When these issues are clearer, we will report on the situation.

Note that sometimes groups that file initiatives file clarifications or new versions before deciding what to circulate.  You can be sure that if this initiative gets on the ballot, there will be a major campaign against it.  The 2014 ballot will have other initiatives on it. There will be an initiative battle between doctors and trial lawyers, for example.  So there will be competition for public attention. 

Below are some excerpts from the initiative.  You can find the full initiative at:
https://oag.ca.gov/system/files/initiatives/pdfs/13-0026%20%2813-0026%20%28Pension%20Reform%29%29.pdf  If you go to that address and get a blank page, try downloading the file and then reading it from the downloaded version.  Yours truly had to go that route.

Excerpts:

From the introduction: This measure allows government employers and voters to modify pension and retiree healthcare benefits and to increase employee contributions in future collective bargaining agreements for future years of service, while protecting benefits previously earned.

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From the text:

1) If a government employer finds its pension or retiree healthcare plan is substantially underfunded and is at risk of not having sufficient funds to pay benefits to retirees or future retirees, or declares a fiscal emergency because the financial condition of the government employer impairs its ability io provide essential government services or to protect the vital interests of the community, the government employer, in addition to its current powers and the powers set out in this Section, shall have the authority to implement one or more of the following actions for all employees, within the limits of the United States Constitution:

(i) Reduce the rate of accrual for pension or retiree healthcare benefits to be earned in the future.

(ii) Reduce the rate of cost of living adjustments for pension or retiree healthcare benefits to be made in the future.

(iii) Increase the retirement age for payment of pension or retiree healthcare benefits to be earned in the future.

(iv) Require employees to pay a larger share of the cost of pension or retiree healthcare benefits.

(v) Other reductions or modifications of pension or retiree healthcare benefits agreed upon during collective bargaining.

(2) If a government employer takes any of the actions described in this subsection, such actions shall apply only to work performed by employees after the date on which the government employer takes such actions.

(3) If such actions are within the mandatory scope of collective bargaining, they shall be submitted to collective bargaining. If the government employer and represented employees do not reach an agreement within 180 days, the government employer shall have the authority to implement such actions. Retirement plan administrators shall be required to implement changes as directed by the government employer unless ordered otherwise by a court.

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5(j)(1) For any pension or retiree healthcare plan with assets equaling less than 80 percent of the plan's liabilities, as calculated by the plan's actuary using generally accepted accounting principles, the government employer shall prepare a pension or retiree healthcare stabilization plan.

(2) The pension or retiree healthcare stabilization plan shall specify actions designed to achieve 100 percent funding of the plan within 15 years while preserving basic government services. Such plan shall identify (i) the benefits to be modified, if any, (ii) the additional costs to be incurred by employees, if any.

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"Government employer" and "employer" shall mean the state or a political subdivision of the state, including but not limited to counties, cities, charter counties, charter cities, charter city and counties, school districts, special districts, boards, commissions, the Regents of the University of California, California State University, and agencies thereof For the purposes of this section, the Legislature shall serve as the government  employer for the members of the California State Teachers Retirement System.

UPDATE: The Sacramento Bee website has a preliminary story about the filing at:
http://blogs.sacbee.com/the_state_worker/2013/10/california-public-pension-ballot-initiative-san-jose-chuck-reed.html

UPDATE: If you want to get a sense of what the tone of the campaign against the initiative will be, go to http://www.calitics.com/diary/15285/career-politician-teams-up-with-enron-billionaire-to-gut-californians-retirement