California Voters Approve Pension Cuts For Public Employees
In addition to Wisconsin, organized labor was dealt another blow yesterday when voters in California approved measures to cut public employee pensions:
SAN DIEGO—Voters in two major California cities overwhelmingly approved cuts to retirement benefits for city workers in what supporters said was a mandate that may lead to similar ballot initiatives in other states and cities that are struggling with mounting pension obligations.
Supporters had a simple message to voters in San Diego and San Jose: Pensions for city workers are unaffordable and more generous than many private companies offer, forcing libraries to slash hours and potholes to go unfilled.
“The public is frustrated,” said San Diego Councilman Carl DeMaio, a Republican who staked his mayoral bid on the pension measure and advanced to a November runoff in Tuesday’s election to lead the nation’s eighth-largest city.
In San Diego, 66 percent voted in favor of Proposition B, while 34 percent were opposed. Nearly 97 percent of precincts were tallied by early Wednesday.
The landslide was even bigger in San Jose, the nation’s 10th-largest city. With all precincts counted, 70 percent were in favor of Measure B and 30 percent were opposed.
“The voters get it, they understand what needs to be done,” said San Jose Mayor Chuck Reed, a Democrat who has called pensions his highest priority.
Shrinking tax revenues during the recession are also responsible for service cuts in San Diego and San Jose, but pensions were an easy target. San Diego’s payments to the city’s retirement fund soared from $43 million in 1999 to $231.2 million this year, equal to 20 percent of the city’s general fund budget, which pays for day-to-day operations.
As the pension payments grew, San Diego’s 1.3 million residents saw roads deteriorate and libraries and recreation centers cut hours. For a while, some fire stations had to share engines and trucks. The city has cut its workforce 14 percent to 10,100 employees since Sanders took office in 2005.
San Jose’s pension payments jumped from $73 million in 2001 to $245 million this year, equal to 27 percent of its general fund budget. Voters there approved construction bonds at the beginning of the last decade, but four new libraries and a police station have never opened because the city cannot afford to operate them. The city of 960,000 cut its workforce 27 percent to 5,400 over the last 10 years.
On some level it’s not surprising that something like this would be successful in a state like California, where state and local budgets have been out of control for years. Nonetheless, if this can pass in one of the bluest states in the nation, we could be entering a very significant period where the relationship between public employee unions, which even Franklin Roosevelt opposed, and the taxpayers will be significantly changed.
Cuts will of course reduce spending even further, but unlike the federal government which is a cutrency issuer, California is a currency user and therefore has no choice but to balance its spending and revenues. The situation where states are experiencing severe budgetary distress is exactly where D.C. is supposed to step up its game in providing aid, but our domestic deficit terrorists have made that impossible.
It really is a no brainer. Outsized pension benefits to people who work on the public dime is an affront to the public even in periods of surplus. During periods of severe deficits to continue having taxpayers fund outsized pension benefits for public workers is an affront even to basic cognition, much less to fiscal sanity.
We also need to move far away from defined benefit plans for public sector workers and towards defined contribution plans. For obvious reasons.
Regarding the larger issue, public sector unions themselves, they’re the worst idea in state and municipal fiscal history. The notion of collective bargaining (i.e., artificially high wage and benefit costs and less flexibility in hiring and firing) for people whose wages and benefits are paid by taxpayer dollars is so monumentally convoluted it boggles the mind. The sooner the public sector unions are eviscerated the better off the country will be.
@Tsar Nicholas:
“…The notion of collective bargaining (i.e., artificially high wage and benefit costs and less flexibility in hiring and firing) for people whose wages and benefits are paid by taxpayer dollars is so monumentally convoluted it boggles the mind. The sooner the public sector unions are eviscerated the better off the country will be. ”
Seriously?
Collective bargaining is the evil that is destroying America?
Really?
… REALLY ??!!!!??
The thing that created the US Middle Class… the concerpt of a fair work week… the thing that alloowed for the greatest economic boom ever that helped create the America from which we now all benefit…
–> THIS <– is the problem???
… god… what a freakin' jerk.
No wonder people ridicule you on this website.
However, the pension for the ugly public employees was spared. They’ve suffered enough already just looking like that.
@Liberal Capitalist:
He didn’t say that. There is something off about a “collectve bargaining” situation where the union members, on account ofalso being voters, are sitting on both sides of the table.
The only way you make real progress on pension costs is to reduce the benefits for police and fire employees. Those people can, in most California cities, retire at the age of 50 or 55 with over 67% of their final salary as retirement pay. Also, in CA, many of these retirees go out on service-related disability retirement, which means that most of their retirement income is tax free. For most cities the employer cost of police and fire retirements is over 20% of salary.
I guess the sanctity of contract doesn’t mean that much when it’s a public employee, right?
What do you think public employees will do in the future? Demand that they get paid more up front if they have to plan for the risk that down the road their pension funds will be yanked away from them. Free market, right?
Maybe we should get rid of pension plans for everyone, period. Or insist that they be fully funded up front. The problem is that too many cities and states put nothing but promises into their pension plans and now the bill is coming due.
@Stormy Dragon: Dammit you beat me to it.
I remember one of the San Anselmo police captains taking full disability retirement back in the 90s. Two weeks later he announced he had started a security consulting business. Down the road in Fairfax, the chief took full disability retirement because “job related stress” had allegedly ruined his health. Stress – in Fairfax?
SF fire chief recently retired @ 53 with a pension of $277,656 per year. Her stint as chief was entirely undistinguished.
SF fire chief Heather Fong
@anjin-san:
The only stress in Fairfax is that created by Frank Egger.
Seriously, nearly every police officer in the state starts laying the groundwork for a disability retirement as soon as he/she starts working. I’m not sure what the percentage is these days but I believe a majority of police and firefighters retire on disability status – it costs taxpayers a lot of money. Workers compensation costs and rates are extremely high for police and fire partly because of their job requirements and partly because all those guys retire with disability status.
@Stormy Dragon: Unless the public employees are a significant chunk of the electorate — 10% or more, say — then they really aren’t on both sodes of the table.
I work at a company where they give me a couple shares of stock, along with my pay. Does that make me an owner? No, not in any meaningful sense. Technically, my tiny amount number of shares have voting privileges to try to oust the board, but really, I’m just an employee.
They were city/county elections. I don’t know my San Jose, but San Deigo is pretty conservative.
Still, I think the primary outcome of this will be unions demanding more upfront pay in contract negotiations, since we’ve demonstrated that a commitment to public workers means nothing.
Back in my bartending days I would hear them discussing this very subject. The game plan was generally get out with a full disability pension by age 45.
@Tsar Nicholas: Cut in compensation for everyone! This is where this country is going. Since the risk of retirement will be on the individuals, the uncertainty of the future will hinder our economy for generations.
It’s a clever game, all right. The people who run corporations slash pension, loot the funds, and pocket all the money that is contractually owned to the workers. And then they tell the workers “look how much better off those public employees are — they have pensions while you don’t.” And the morons go after the public employees for having a pension, instead of the people who get rich stealing theirs.
WR,
Except, of course, that the vast majority of private sector employees have not had a traditional pension in a very long time thanks to the advent of the 401(k). Public employment is the one of the only major areas of employment left where the employer is expected to subsidize the employees retirement.
City and county workers generally are overpaid. Federal workers not so much.
As others have stated, the problem is that contracts local gov’ts entered into with the unions can’t be unilaterally broken or abrogated just because the costs climb.
The only way out is re-negotiation of worker contracts with the consent of the unions, or bankruptcy – a poison pill which a few years ago would have been unthinkable – now increasingly appealing to municipalities which are staring at hockey stick like growth curves for benefits and pensions.
The Dems of course are loath to go after their primary source of campaign funds, but voters are not going to stand for prison guards making $120k (with overtime) a year or CHP officers retiring after 15 years on the job with 90% pension payments.
The Dems, should have seen this coming and warned their labor supporters of the coming backlash and potent political issue this hands to the wingnuts.
Unions should capitulate to friendly Dem officials who will use a scalpel and not a repub cudgel to selectively pare down these escalating costs or they may face even worse cutbacks if wingnuts gain more power.
@ WR
There is truth in what you are saying, but there are serious problems in public sector compensation that need to be addressed.
Where the right has gone wrong is in focusing on teachers, who are not the real problem in the public sector, (if anyone in public education needs attention it is senior executives, check out compensation in the UC system) and by declaring compensation for senior corporate executives and officers to be a holy totem that cannot even be discussed.
The future is probably going to be a switch from
defined benefit plans to defined contribution plans
That is, 401k type plans with a 7% employer match
Something like that
How was it possible to get close to a 500% increase in the fund in just 13 years? Or was there a typo in there somewhere?
@george:
Look over this link from the mayor’s office in San Jose. In brief, raises have been given without increasing contributions to the retirement kitty, folks living longer and retiring earlier and finally, decreased investment returns. There is also a link to the city auditor’s report that would be worth reading.
@al-Almeda
Agreed. Strip out the Police and Firefighter pensions, and what’s left really isn’t that horrible aside from a small number of cases. For most public sector employees, the pension + social security puts you at working-class level wages in your retirement.
Of course, that would require municipal and state governments to stop passing the buck on compensation, and actually pay the Firefighters and Police more instead of promising them big pensions at the end of their careers. I don’t know if they can do that – the temptation to kick the problem down the road is huge.
Where I live, a lot of firefighters and police have six figure incomes. How much more should we pay them?
@Doug Mataconis: Yes, and the 401k came along as corporations stole the pension plans from the workers. Are you saying that because they got away with massive theft, it’s now a public good?
@anjin-san: Hey, let’s pay them minimum wage. It’s not like they’re bankers or anything. And why should they expect a decent living just because they risk their lives to keep us safe?
Where did I say anything even a light-year from that? Please don’t go Jenos on me.
I think 100k+ is a decent living. And the plus is a real plus, that easily can be 150k. Where did I advocate cutting their pay? What I did say is cops and firemen where I live make a good living. They don’t need a bump in pay if their pensions are brought into line with reality. Tell me, do you think a fire chief who retires @ 53 should get 277k a year for the rest of her life?
The pension thing is out of control, there is really no doubt about that. I know dozens of cops personally that took tax free disability pensions that were completely bogus.
I believe I also touched on some of the insane compensation in the private sector. If you can show where I have been puckering up for bankers, please do.
@WR:
Minimum Wage? Let’s be serious.
The are being paid very very well to perform their jobs, it’s their pension plans that are unsustainable – retirement at the age of 50-55 on a pension of 70% to 100% of final salary, not to mention retirement health insurance plan costs?