Reform Measure Aimed at CalPERS Could Appear on California Ballot by 2016

Chuck Reed

Back in November, Pension360 covered former San Jose Mayor Chuck Reed’s intention to keep pushing for pension reform even after leaving office.

According to a Reuters report, he’s following through: Reed, along with a coalition of business leaders and politicians, is launching a push to get a pension reform measure on the statewide ballot.

Details are sparse on what exactly the measure would look like.

But it’s likely the measure would aim to make it easier for cities to cut pension payments to CalPERS, or reduce the cost of leaving the fund entirely.

More from Reuters:

The measure would take aim at California’s $300 billion giant Calpers, which has a near-iron grip on the state’s pensions. Calpers, America’s largest public pension fund and administrator of pensions for more than 3,000 state and local agencies, has long argued that pensions cannot be touched or renegotiated, even in bankruptcy.

“Calpers has dedicated itself to preserving the status quo and making it difficult for anybody to reform pensions,” Reed said in an interview. “This is one way to take on Calpers, and yes, Calpers will push back.”

Calpers spokeswoman Rosanna Westmoreland said: “Pensions are an integral part of deferred compensation for public employees and a valuable recruitment and retention tool for employers.”

[…]

To win a place on the 2016 ballot, backers of the initiative will have to obtain the signatures of 585,000 registered voters, or 8 percent of the number of voters in California’s last gubernatorial election, in this case 2014.

Reed and his allies have been huddling with legal advisers for months to devise a voter initiative that is simpler and less vulnerable to court challenges than last year’s effort.

Reed’s goal is for the measure to appear on the November 2016 ballot.

 

Photo by  San Jose Rotary via Flickr CC License

CalPERS: Think Tank “Needs A Lesson In Fact Checking” After Tax Claims

Welcome to California

When Californians get their ballots, they will notice 140 different proposed tax increases. One think tank last week said they knew the reason behind the surge—high pension costs.

Mark Bucher, president of the California Policy Center, wrote a column for the Sacramento Bee earlier this week claiming the influx of potential tax increases stemmed from ballooning pension obligations.

Bucher wrote:

Tax-weary Californians looking to explain this paradox need look only to former Vernon (population 114) city administrator Bruce Malkenhorst for an answer.

Malkenhorst received a $552,000 pension in 2013, according to just-released 2013 CalPERS pension data on TransparentCalifornia.com.

[…]

Malkenhorst is part of a growing number of 99 California retirees who received at least half-million-dollar pension payouts in 2013, up from four in 2012. Such lucrative pensions mean that in 2014, California will spend approximately $45 billion on pensions, equaling total state and local welfare spending for the first time. And in the zero-sum game of government spending, an extra dollar spent on pensions means one less spent on welfare, infrastructure or safety – or returned to the taxpayer.

Though Malkenhorst and his ilk personify California’s pension profligacy, they do not drive it. That distinction goes to the 40,000 California retirees who took home pensions greater than $100,000 in 2013.

CalPERS has now responded to the California Policy Center with the following statement, titled “CPC Needs a Lesson in Fact Checking”:

The California Policy Center (CPC) used stale data from 2013 in its Sacramento Bee commentary “Big pensions drive proposed tax increases on CA ballots” and never bothered to check with CalPERS (or even media coverage) to learn that the pension data was no longer accurate. Bruce Malkenhorst, former City Manager of Vernon, no longer receives his half-million dollar pension. Earlier this year CalPERS slashed his benefit to approximately $10,000 a month in April from its peak of more than $45,000 a month, concluding he derived the benefit improperly from the salary set by his employer the City of Vernon. CalPERS is also seeking to recover overpaid assets from Malkenhorst.

While members earning more than $100,000 per year in pensions receive high publicity, the fact is they only represent 2.6 percent of CalPERS retiree payments. It would be helpful if the CPC and others would more carefully check the facts and report on the full picture instead of just painting all public employees with the brush of the likes of Malkenhorst.

Read the statement here and the original article from the California Policy Center here.

Think Tank: Blame Pension Costs For The 140 Tax Increases On California’s Ballot

Seal of California

When Californians go to vote on November 4, they will find a ballot stuffed with tax hikes. There will be 140 different proposed tax increases on ballots across California. Is there a reason behind the surge?

Mark Bucher, president of the California Policy Center, thinks he knows the reason. In a new column he says voters need look no further than pension costs. From Bucher’s column in the Sacramento Bee:

Tax-weary Californians looking to explain this paradox need look only to former Vernon (population 114) city administrator Bruce Malkenhorst for an answer.

Malkenhorst received a $552,000 pension in 2013, according to just-released 2013 CalPERS pension data on TransparentCalifornia.com.

[…]

Malkenhorst is part of a growing number of 99 California retirees who received at least half-million-dollar pension payouts in 2013, up from four in 2012. Such lucrative pensions mean that in 2014, California will spend approximately $45 billion on pensions, equaling total state and local welfare spending for the first time. And in the zero-sum game of government spending, an extra dollar spent on pensions means one less spent on welfare, infrastructure or safety – or returned to the taxpayer.

Though Malkenhorst and his ilk personify California’s pension profligacy, they do not drive it. That distinction goes to the 40,000 California retirees who took home pensions greater than $100,000 in 2013.

These are the pensions of Susan Kent, a retired Los Angeles city librarian, who took home a $137,000 pension in 2013. And Thomas Place, a retired San Joaquin court reporter, whose pension was $105,000. And, Betty Smith, a retired Alameda nurse, who received $116,000.

Anecdotal evidence aside, more tax dollars than ever are going toward paying pension costs. From Bucher:

Six-figure pensions for mid-level public servants have brought the state to the point where one out of every nine state and local tax dollars goes to pay for pensions. That’s up from one in 16 tax dollars in 1994. Tax increases now do not increase government services, but simply service government pensions.

And these compensation figures do not include five-figure health benefit obligations, which will only increase as the population ages and health care costs inflate. Bankrupt Stockton, where city employees who worked as little as one month receive a lifetime of retiree health benefits (including spousal coverage), is already paying this price.

Barring pension reform, Stockton – where one in five tax dollars will soon go to pensions – is a harbinger of things to come for other California cities that find themselves at some point on Stockton’s adverse pension spiral: Big pension obligations mean fewer tax dollars for services like safety and infrastructure, driving away taxpayers and increasing pension burdens further. Hence the need for yet more tax increases.

But taxpayers are having trouble keeping up: California pension funds are currently only 74 percent funded. And this is an optimistic estimate given that pension funds assume a very high rate of return of about 7.5 percent per year, an ambitious goal in this investment climate. For every 1 percent this projection drops, California taxpayers must contribute $10 billion more per year to maintain the same funding level, according to a recent analysis by the California Policy Center, using investment formulas provided by Moody’s Investors Service.

The entire column can be read here.