“Unfinished business”: Chuck Reed’s just getting started on pension reform

All Chuck Reed needs is $25 million, and that’s all he needs.

“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.

Since 2005, the number of retirees in the California Public Employees’ Retirement System (Calpers) with six-figure pensions has tripled, and pension debt for local governments is expected to increase by as much as fifty percent over the next five years.

Reed says something’s gotta give.

“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.”

Although he’s still hashing out what the initiative will look like, he 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.”

Among the members of Reed’s reform posse are Stephanie Gomes, a former vice mayor of Vallejo, who was also a member of its city council while it clawed its way through bankruptcy.

“Our elected officials have to get off their behinds and represent the people who elected them,” says Gomes. “I don’t have faith that’s going to happen, so it’s got to be the will of the people to get our fiscal house in order, to get it right for the taxpayers and the employees, who still deserve a pension. It has to work for both.”

Like Reed, Gomes is a Democrat who says she’s been painted “as a Republican, against working families.”

“The public sector labor unions have become what they were formed to fight,” she says. “It’s about them protecting their own interests and they were lucky enough to get those high pensions and benefits, and they’re not going to let them go without a fight.

“This fight is not about ‘R’ or ‘D,’ it’s about services that we’re not getting any more because of these high pensions.”

“Calpers is raising rates,” she says. “They can just hold our their hand and say ‘give it.’ Cities at some point are going to have to cry uncle. When they can’t pay Calpers, it’s all going to topple down, because cities are in a straightjacket.”

A spokeswoman for Calpers says they won’t speculate on the proposed ballot measure, but in regards to the 2013 initiative, Calpers commented “that any changes to pension benefit levels should be determined by the employer and the employees, and not at the ballot box.”

Gomes believes the only chance for change is at the ballot box. A turning point came for her during an all-time low on her time in city government.

“It was the night the Vallejo city council, in the middle of bankruptcy, still approved a new police contract that had raises for two years and free medical,” she says. “I’m in the minority and watching the lights go up, and it was the most painful moment of my career in public service. They were serving the special interests that paid to get them in office.”

Protecting the status quo is big business in California. Unions spent $85 million in 2012 to support Governor Brown’s tax hike and to defeat a measure that would have prohibited collecting union dues for political campaigns. Since 2002, the California Teachers Association has spent about $170 million on political campaigns, according to the National Institute on Money in State Politics. The CTA just spent $11.2 million on independent expenditures to re-elect State Superintendent of Schools Tom Torlakson against an education reform candidate.

Another California mayor working closely with Reed, Anaheim’s Tom Tait, says it’s about gaining the power to act locally.

“To even begin to fix an unsustainable system, California cities need the ability to locally negotiate future pension earning formulas,” says Tait. “It is clearly in everyone’s best interest to address this problem sooner rather than later. The longer the state delays, the fewer options there are, and none of them easy.”

Marcia Fritz, a pension reform advocate and Democrat who advised Governor Brown on his 2012 pension reform law known as PEPRA, says Reed and his team should be meeting with Brown now. In 2012, she helped convince Brown’s advisors the only way they’d get their Prop 30 tax increase passed is if they enacted pension reform.

Fritz says today, the song remains the same.

“Brown needs to give the voters something in order to get them to agree to extend the Prop 30 tax increase,” she says. “He may ask to make the tax increase permanent to keep teachers’ retirement funds solvent. So, he might just embrace Reed’s measure to get buy-in.”

She says the recent Stockton bankruptcy decision, where a federal judge declared pensions can be cut during bankruptcy, is spooking unions and that Reed can capitalize on this fear.

In a written statement, Calpers CEO Anne Stausball commented that the federal ruling is not legally binding on any of the parties in the Stockton case, and when Stockton got the greenlight to emerge from bankruptcy without cutting pensions, Stausball noted: “The judge recognized that the city’s employees and retirees have already made significant concessions.”

While Reed’s hitting the trail to raise the major funds needed for a statewide initiative, he’s got a few items of business to clear up. He’s waiting for a hearing date on a lawsuit against California Attorney General Kamala Harris over the description of a previous pension initiative. The lawsuit claims the initiative’s wording was fatally biased.

He also initiated a federal corruption probe into the San Jose Police Association, claiming its union president fouled up recruitment efforts. The SJPD counterpunched, initiating an investigation of Reed.

It’s all bare knuckle politics, and it all takes time, something California may be running short on.

Reed says he’s undeterred.

“The pain of doing nothing is worse than the pain of taking on the issue,” he says.

Comments (3) Add yours ↓
  1. Tough Love

    Quoting … “Although he’s still hashing out what the initiative will look like, he says the main thrust will be to give state and local governments authority to alter future pension formulas for current employees.”

    Perfect …. without THAT change, everything else is fluff, smoke-and-mirrors.

    November 13, 2014 Reply
  2. SDouglas47

    “All I need is $25 million”

    Haven’t we all felt that way, from time to time?

    But it’s an exercise in futility, anyway. He will never get enough financial backing to get this through.

    He has already been told he can’t reduce pension formulas, but he can (legally) reduce present wages by an amount equal to the desired savings. However, he can’t (pragmatically) reduce salaries, because he couldn’t retain qualified workers at those rates.

    Any city or county knows that if they do manage to reform pensions significantly, for many positions they will need to increase present wages to counteract the losses.

    There probably is a way to actually redesign pensions so they are more transparent and somewhat more equitable between long term and short term public workers while still keeping the significant advantage of the defined benefit model, but no one seems to be looking there.

    For Mayor Reed and his allies, pension “reform” is a euphemism for reduction in compensation.

    November 14, 2014 Reply
  3. BOPRN

    TL -

    Mark this day, we agree on something, FUTURE years should be negotiable. Much like Social Security pushing back the age of ‘full pension’, so should various PERS systems across the country to maintain balance between what is to be paid and what is on hand. Besides that, it wouldn’t kill people to work a year or two extra to make sure the plan is solvent.

    November 14, 2014 Reply

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