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Outgoing San Jose Mayor Chuck Reed Will Continue Pushing For Pension Reform After Leaving Office

Chuck Reed won’t be the mayor of San Jose much longer. But even as he leaves office, Reed doesn’t plan on leaving politics behind. The outgoing mayor says he will continue raising money and campaigning for pension reform in California.

His ultimate goal is to get a state-wide pension reform measure on the 2016 ballot.

From Fox & Hounds:

“For me, it’s unfinished business,” says Reed, the outgoing mayor of San Jose, California. “I’m stubborn, persistent, whatever you want to call it.”

He’s talking about his plans for a statewide pension reform initiative in 2016; the $25 million is the cost of taking the message to the streets. While some observers may have thought he’d abandoned reform after his abortive 2014 attempt, Reed says he’s just getting warmed up.

“The fight will continue,” he says. “I’m going to work on fiscal reform issues, on the state and national level.”

For Reed, it’s personal.

“The problem is still threatening my city,” he says. “Retirement costs continue to go up, and this year the costs ate up all my revenue.”

And this was after voters in San Jose passed pension reform.

[…]

“The legislature is not going to take action,” he says. “So the best approach is working at the local level to create political momentum with a statewide initiative, allowing voters to go over the head of the legislature.”

Details are sparse on what Reed’s initiative would look like, in part because he is still figuring it out himself. But he offered some details to Fox & Hounds:

[Reed] says the main thrust will be to give state and local governments authority to alter future pension formulas for current employees.

“The retirees are the last people who should be impacted because they’re already retired,” he says. “That’s why I focus on current employees, because they still have the capacity to earn. The younger employees understand that it’s something that’s not sustainable, and they are the ones who are going to get hurt.”

The next mayor of San Jose will be Sam Liccardo. He starts Jan. 1.

Photo by San Jose Rotary via Flickr CC License

Public Utility Company: We Can’t Afford Jacksonville’s Pension Reform Deal

A key part of Jacksonville Mayor Alvin Brown’s pension reform proposal was forcing the city to pay an addition $40 million every year for 10 years into the city’s Police and Fire Pension Fund.

But the question was always: where does the city get that money?

The solution, pushed for months by Brown, was to have JEA, a public utility company, make the payments.

But after further analysis, JEA says it simply can’t foot the bill.

From the Florida Times-Union:

In a closely-watched report completed with help from outside attorneys and financial consultants, JEA says it can’t afford Mayor Alvin Brown’s proposal to use the utility’s financial muscle to help pay off the city’s $1.65 billion Police and Fire Pension Fund debt, according to a draft copy of the document.

The report’s conclusion is a body blow to Brown’s efforts to pass his signature pension-bill, and it echoes skepticism some JEA officials have aired for months about the idea — which would have JEA pay an additional $40 million a year for 10 years on top of the more than $100 million it already contributes annually to the city’s general fund.

“JEA recognizes the challenges for our community resulting from very significant unfunded pension liabilities for the Police and Fire Pension Fund and General Employee Pension Plan, which includes JEA employees,” the report says. “However, at this time, we are unable to increase our contribution to the City of Jacksonville without increasing rates, and even with a rate increase an increase in contribution to the city threatens our bond ratings.”

JEA says that it has other challenges it needs to address, and shifting more money towards the pension system would hurt its credit. From the FTU:

The report details many of the financial challenges facing JEA: industry-wide declines in electric and water sales, impending federal regulations that could come with massive costs and billions of dollars of its own in existing debt.

Several City Council members quickly dismissed Brown’s idea earlier this year, saying it’s clear JEA has too much on its plate.

The nation’s major credit-rating agencies have cautioned JEA that increasing its city contribution — which historically has been higher than the industry average — to address Jacksonville’s pension crisis could hurt its credit.

Officials in surrounding Northeast Florida counties that also use services from the city-owned utility have said they’re wary about the plan if it means higher rates for customers.

JEA already contributes about $100 million to the city’s pension system.

Video: Insights From Switzerland’s Pension System

The above talk was given by Monika Buetler (Universitaet St. Gallen) at the 2014 Pension Research Council Conference; Buetler spoke about her research into Switzerland’s three pillar pension system.

From the video description:

This paper takes Switzerland’s much praised three pillar system to illustrate some of the challenges pension system reforms face in an ageing society. It shows that policy makers are confronted by both individuals with behavioral anomalies and by others strategically exploiting the system. The trade-off between incentives and providing adequate retirement income limits policy options, especially if reforms do not want to impose too many restrictions on individual choice and avoid excessive burdens for the young generation. Reforms can also be seriously challenged by political constraints, in particular institutions of direct democracy.

New Orleans Pension Reform Task Force Begins Work

Last month, New Orleans created a pension reform task force to recommend “fundamental” changes to the city’s Fire Fighters Relief & Pension Fund. On Tuesday, the task force met for the first time. The meeting was covered in the video report above.

The task force consists of:

– New Orleans Chief Administrative Officer Andy Kopplin

– Councilwoman Stacy Head

– Timothy McConnell, superintendent of the New Orleans Fire Department

– Paul Mitchell, Jr., deputy director of the pension board

– Thomas F. Meager, III, secretary and treasurer of the firefighters’ pension board

– Nick Felton, president of New Orleans Fire Fighters Association, Local 632

– Hardy Fowler, an accountant and the former managing partner of KPMG in New Orleans

– Scott Jacobs, an insurance and risk management professional

– Greg Rattler, Sr., a vice president at JPMorgan Chase & Co.

Task Force Leader: Jacksonville Needs to Approve Pension Reform

Over the summer, Jacksonville’s mayor put together a Retirement Reform Task Force. The Task Force’s job description, according to the city website, is to “review the proposed public safety pension reform agreement, seek input from stakeholders and other interested citizens, and make recommendations on how the City should proceed.”

On Monday, the leader of that task force, William E. Scheu, wrote a column for the Florida Times-Union urging the Jacksonville city council to approve the pension reform measure currently in front of them.

The reform measure aims to improve the funding of the city’s public safety pension system by forcing the city to make higher payments to the system – to the tune of an extra $40 million a year.

But city council members are worried because the mayor has not specified where he will get that extra money.

Scheu acknowledges that concern, but says this is the best chance to enact a pension reform measure built by compromise.

From the column:

Last year a broad-based, stakeholder-representative task force met 17 times and urged a comprehensive reform that recognized the interests of the various parties, acknowledged the legal conundrum in which the city was forced to operate and examined various alternatives for reform.

The solutions the task force proposed with the help of The Pew Charitable Trusts included significant governance reforms, benefit reductions for both future and existing employees, a reformed plan design and a funding source for accelerated pension contributions.

Task force members considered the fact that litigation was a present fact but an expensive and uncertain route for the future.

Its solution was a compromise that is not perfect, but is attainable and sustainable.

It was supported by the Times-Union and most business, civic and political leaders.

[…]

While the mayor has not provided good leadership in refusing to identify a dedicated funding source for the additional pension contributions recommended by the task force, the City Council should not abandon its own responsibilities and “kick the can” further down the road.

The City Council has an opportunity to move Jacksonville forward by adopting the proposal now before it. It is imperfect, but it is a responsible step toward ensuring that Jacksonville’s quality of life will improve and that the annual fights over funding the city’s core services will end.

The Fitch and Moody’s rating agencies have recognized that Jacksonville’s financial condition is sick.

It is time to enact pension reform.

It is time for Jacksonville to take its medicine for the harm inflicted on it by our leaders in earlier years.

Read the entire column here.

Pension Reform in Illinois Likely to Look Different Under Rauner If Supreme Court Rejects Current Law

Under Gov. Pat Quinn, Illinois passed a sweeping pension overhaul that cut COLAs and raised retirement ages for some workers.

But the state Supreme Court could reject the law. If that happens, it will be Bruce Rauner who will be able to shape reform legislation, which will likely look different than Quinn’s. From the Wall Street Journal:

Confronting the nation’s worst state pension shortfall was the top concern of Illinois Gov. Pat Quinn. The same will likely be true for Bruce Rauner, his newly elected successor.

The Illinois Supreme Court in coming months could dump the $100 billion problem in the lap of Mr. Rauner, who defeated Mr. Quinn on Tuesday to become the state’s first Republican governor in more than a decade.

A year ago, Mr. Quinn, a Democrat, won passage of a bill that lowered future pension costs by shrinking cost-of-living increases for retirees and raising retirement ages for younger employees, among other steps. State workers and retirees challenged the law, and a recent ruling by Illinois’s top court signaled the justices may end up overturning the law.

Mr. Rauner, who was a longtime private-equity executive before deciding to run for governor, has said he favors moving to a 401(k)-style system over pensions, but the shape that would take at the state capitol remains to be seen. Mr. Rauner was quiet the day after his big victory and his campaign declined an interview request.

Part of the challenge for any plan for Mr. Rauner will be getting it through the Democratic-controlled legislature. Many there agree the state has a big problem, but Mr. Quinn had a bruising fight with his own party to broker a deal.

To be sure, Illinois will continue to be a focus of the national debate that’s raging over how to fix ailing public pension systems. But on Tuesday, the Land of Lincoln wasn’t alone in having the issue play a role in the elections.

Bruce Rauner gives some hints about what his plans for pension reform would look like on his website:

I believe we must choose to address this problem head-on. No tinkering around the edges.

We must boldly reform our pension system. To do that, we can:

– Ensure pay and benefits do not rise faster than the rate of inflation.

– Eliminate the ability of government employees to receive massive pay raises before they retire just to increase their pension.

– Cap the current system and move towards a defined contribution system.

Teacher Group: Illinois Pension Reform Is “Direct Violation” of Lawmakers’ Oath of Office

Last week, the Illinois State Journal-Register published a piece by Ty Fahner exalting the state’s pension reform law and detailing the consequences that would face Illinois in the wake of a court rejection.

Now, the newspaper has published a rebuttal from Bob Pinkerton, president of the Illinois Retired Teachers Association.

The letter reads:

“What if pension reform is rejected?”

These words were written by Ty Fahner, president of the Civic Committee of the Commercial Club of Chicago, sometimes referred to as the Millionaires’ Club.

The question should be, “What happens when the Supreme Court reminds us what the Illinois Constitution says in Article 13, Section 5, ‘… benefits, of which, cannot be diminished or impaired?’”

What does the legislature do when it is forced to acknowledge the pension reform lawmakers voted for is in direct violation to their oath of office?

Mr. Fahner writes, “A decade ago, only a small fraction of state revenues went to fund the pensions.”

This is the problem. Over the years, the legislature violated the laws they passed by skipping or reducing pension payments so they could afford new projects.

The state cannot expect retirees to fill the pension gap left by irresponsible lawmakers. It is not right that the legislature is now attempting to reduce benefits to pay for the past negligence of the state.

Over the years, no one complained when new programs were implemented without new revenues because stealing from the pensions seemed harmless to them at the time and these were available dollars already allotted in the state budget.

The bill is coming due for all those years of pension holidays. Illinois has the fifth-largest economy in the country. I believe we can figure out a way to pay our bills.

Read Ty Fahner’s original column here.

Video: Why Did Pension Reform Fail in Ventura County?

Above is a video recapping the state of pension reform in Ventura County, California — and why County voters won’t find a pension reform measure on their ballot today.

Disclosure: the Reason Foundation is a libertarian research organization. Referenced in the video is a report produced by Reason that claims Ventura County could have saved $460 million over the next 15 years if the reform measure was enacted. The report was commissioned by the Committee for Pension Fairness, the group that sponsored the pension reform initiative.

From the video description:

On Tuesday, voters across the county will venture to polling stations for the midterm elections. In Ventura County, California, residents will be able to have their say on a variety of local issues, but there is one initiative they won’t be able to cast their ballot for—that measure is pension reform.

Like so many retirement systems across the country, Ventura has seen it’s pension fund go from having a healthy surplus to being over a billion dollars in debt. To avoid having their county become the next Stockton or Detroit, the Ventura County Taxpayers Association crafted a reform measure that would move the county from a defined benefit to a defined contribution system.

But shortly after it was approved to appear on the ballot, a local judge preemptively ruled the measure illegal and ordered it stricken from the 2014 election—thus ending Ventura’s hopes to change their costly pension system.

According to the judge’s ruling, even though voters elected to create a pension fund decades ago, the law provides them no way to exit the system through a vote. Reformers would have to either repeal or amend the law through state legislation to change their costly pension programs.

The decision was a setback for the VCTA, who had hoped a midterm victory could expedite change to VCERA’s growing mountain of debt. Taxpayers pay $153 million per year to the pension system—that’s triple the number they paid out over a decade ago. In the next five years, that number is expected to climb to $226 million.

“When you look at compensation and pensions…we’re right up there if not higher than anybody else,” states Bill Wilson, a member of the VCTA who has also served on the county retirement board for over 16 years.

The reform would have enacted a defined contribution plan whereby the county would contribute four percent for general county employees and 11 percent for public safety workers. The measure would have only applied to new employees hired after July 2015.

Jacksonville Pension Reform Bill Faces Obstacles As It Heads To City Council

Jacksonville Mayor Alvin Brown’s pension reform bill is headed to the City Council, where it will be scrutinized and approved by two separate committees.

But it won’t be smooth sailing for the bill, as several council members will likely push for unpopular amendments to the measure.

The bill aims to improve the funding of the city’s public safety pension system by forcing the city to make higher payments to the system – to the tune of an extra $40 million a year.

From the St. Augustine Record:

When Mayor Alvin Brown’s pension reform deal heads to a City Council committee today, the meeting will be led by a councilman pushing for several significant changes that could jeopardize the bill.

Rules committee Chairman Bill Gulliford said he’ll try to convince his colleagues to adopt one of the six amendments he’s proposed to the pension package, which was based on negotiations Brown conducted earlier this year with the Police and Fire Pension Fund.

Gulliford’s amendments would seek further reductions in pension benefits for current police and firefighters, which the pension fund rejected during negotiations.

If the council approves any amendments to the pension deal, the pension fund’s board also must approve the changes.

Brown has touted his deal as the city’s best shot yet at fixing its pension crisis and its looming $1.65 billion pension debt. He has said the deal would save the city $1.5 billion in the next 35 years.

[…]

In recent weeks, some council members questioned the deal’s merits.

The leading criticism: Brown hasn’t identified a realistic funding source for the $400 million more the city and its taxpayers will contribute to the fund over 10 years — on top of the yearly required amount — a major component of the deal’s saving.

The extra $40 million per year in contributions would expedite the paydown of the city’s debt obligation to the pension fund and save money over the long haul, just as homeowners benefit by making extra payments on their mortgages.

Brown’s legislation would use money from the pension fund’s reserve accounts to cover this year’s $40 million payment and then $21 million in the 2015-16 budget. But there isn’t a definitive plan yet to pay the rest.

Other critics say current police and firefighters really didn’t sacrifice anything to help resolve the pension plan’s woes.

For the bill to pass, ten council members need to support it. Currently, only seven council members are on board.

Former Illinois Attorney General: Pension Reform “Single Most Important” Issue Facing Illinois

Ty Fahner, president of the Civic Committee of The Commercial Club of Chicago and former Illinois attorney general, has been pushing Illinois lawmakers for months to come up with a “Plan B” for pension reform.

He contends that it’s likely the Illinois Supreme Court will overturn the state’s pension reform law. And if it does, Illinois has no contingency plan in place.

In a column in the Belleville News-Democrat, Fahner says of pension reform: “no issue of greater importance to Illinois’ future”. He writes:

What if?

It’s the single most important question that Illinois residents should be asking, and candidates for office should be answering.

Yet as Election Day approaches, too few are asking about the most critical issue facing the state.

What if the Illinois Supreme Court rejects pension reform?

Illinois needs an open and honest conversation about the potential impact this decision could have on the state and its citizens. Regardless of the outcome, the consequences are far-reaching and voters deserve to know whats at stake.

This is about what is good for the state and its future. Illinois needs to be in a position to grow its economy, create jobs for Illinois residents, invest in education and infrastructure and provide for the most vulnerable among us. The pension law decision will have a sweeping impact that will touch every Illinois resident in one way or another.

Illinois can no longer kick the can down the road. Half measures will not suffice. We need to address these issues now. Even if the law is upheld, we are still lagging virtually every state in the nation. All of the answers to these questions will take time to develop, win approval from the General Assembly and implement. Many of the social services already have been cut to the bone and educational funding reduced by $2.7 billion since 2009 — what is the plan?

[…]

With the future of pension reform hanging in the balance, now is the time to ask the question.

What if?

No issue is of greater importance to Illinois’ future.

And if the Supreme Court does reject the state’s pension reform law, Fahner writes:

If the court rejects the law, $145 billion in state contributions is immediately added to the taxpayer tab over the next 30 years. Whether through even more tax hikes or continued service cuts, that money has to be accounted for. We would pay a lot more for a lot less in return.

Property taxes could rise to the highest in the nation. School districts could face further budget strain. Tens of thousands of seniors, children and mentally ill could face significant reductions, if not loss, of the state assistance on which they rely. The security of the pension systems themselves would be jeopardized.

Illinois needs this conversation. The sad truth is that all of the state”s biggest problems are directly tied to the pension crisis, which has already resulted in paralyzing tax hikes, steep cuts to social services, unreasonable burdens on students and the loss of jobs to neighboring states. Already, Illinois ranks last or near last among the states on every economic indicator from unemployment, to property taxes, to jobs climate and state support for education.

Read the entire column here.

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