By Gary Cohn

In a move to slash the retirement benefits of public employees in California, a group of mostly conservative policy advocates has been working behind the scenes on a possible 2014 ballot initiative. A copy of the still-secret draft initiative, which could dramatically impact the lives of hundreds of thousands of Californians and send a signal nationwide, has been obtained by Frying Pan News. (See the document’s text following this article or click here.)

If enacted, the proposed law would allow the state and local governments to cut back retirement benefits for current employees for the years of work they perform after the changes go into effect. Previous efforts to curb retirement benefits for public employees have largely focused on newly hired workers, but the initiative would shrink pensions for workers who are currently on the job.

“This initiative defines that a government employee’s ‘vested rights’ only applies to pension and retiree healthcare benefits earned for service already rendered, and explicitly empowers government employers and the voters to amend pension and retiree healthcare benefits for an employee’s future years of service,” the private draft states.

In other words, current state and municipal workers’ retirement benefits will only be partially guaranteed by the number of years they have already worked; from the time the initiative becomes law, the accrual of those benefits will be drastically curtailed.

One of the rationales provided by the draft ballot to justify its unprecedented reach into the lives of public employees is the ongoing funding shortfalls that California and many of its cities find themselves confronting. But, while pledging to help the state “maintain retirement plans that are sustainable, fiscally sound and able to meet the commitments to its employees,” the draft also claims its reduction of pension benefits is being carried out “[i]n order to protect the government’s ability to provide essential services to the public.”

The draft initiative is being circulated by San Jose Mayor Chuck Reed, who successfully pushed a pension-busting ballot initiative in his city’s 2012 election. That law, like a similar one passed the same year in San Diego, is currently being challenged in court. Reed, according to several sources, has been circulating the draft among other mayors, public officials and others in California who believe that public employee pensions should be scaled back.

Following repeated attempts to reach Reed for comment on the draft ballot, Frying Pan News received what appeared to be confirmation of its authenticity in an email sent by a Reed press aide:

“Throughout this process, there have been numerous discussions about policy options and multiple versions of draft language, so it’s impossible to tell what it is you may have. However, the substance of that statement is consistent with what the Mayor has advocated for more than a year.”

Marcia Fritz, president of the California Foundation for Fiscal Responsibility, goes further and says, “I’ve seen the draft – I don’t know if it’s final yet. I’ve been asked to weigh in on it.”

Dave Low, chairman of Californians for Retirement Security, a coalition that represents more than 1.5 million public employees, says that the draft measure being circulated by Mayor Reed and others would “take promised retirement benefits away from teachers, nurses, firefighters and other public employees.” He adds that courts have consistently decided that it is not permissible to cut promised retirement benefits to public employees. “A promise made should be a promise kept,” Low says.

Chuck Reed, a Democrat, has increasingly been seen as the public, bipartisan face of a nationwide effort to scale back retirement benefits for public employees. But behind the scenes, this effort is quietly spearheaded by a host of largely conservative individuals and organizations.

In May, for example, Reed was only one of dozens of people present at a closed-door pension summit held at a Sacramento hotel, where strategies to limit public retirement benefits were discussed. And earlier this week, Frying Pan News reported that the Pew Center on the States, an arm of the respected Pew Charitable Trusts, had formed an unusual partnership with the Laura and John Arnold Foundation in an effort to curb public employee pensions in several states.

The movement to curtail public employee pension benefits in California is being watched closely around the nation. Both those who favor curbing pensions and those who oppose it agree that any ballot initiative, such as the one laid out in Reed’s blueprint, will involve a lengthy and costly fight.

“The problem with initiatives is that public employee labor unions are very strong in fighting them,” says Jeff Adachi, the elected Public Defender in San Francisco and the man behind an unsuccessful initiative to curb pension benefits in that city. “It’s a tough route to go.”

That would seem to be borne out by reactions to Reed’s initiative from organized labor, whose representatives blame politicians’ inability to find the resources to give retirees the benefits they promised workers in the form of negotiated contracts. They also point to figures put out by the California Public Employees’ Retirement System (CalPERS) showing that the average public employee retires on only $2,629 a month.

Others decry what they regard as the naked unfairness of having rules changed on them in mid-career. One such person is Lori Adams, a 46-year-old Burbank High School math teacher. She has been a public school teacher for 16 years and is planning to teach for at least another 14 years.

“If you went to a bank and made an agreement for a car loan or a house loan, and then in the middle years they decide to change your rate – that’s not fair,” says Adams, who is also president of the Burbank Teachers Association. “It’s making a deal when you sign it and in the middle of the game changing the rules. You make life decisions based on it.”

Marcia Fritz and others, however, see the ballot initiative as an opportunity to clarify what they regard as murky rules regarding state and municipal workers’ retirement plans.

“It’s putting public employees on the same page as employees in the private sector,” says Fritz. Yet initiative opponents, including Jennifer Baker, a retirement expert with the California Teachers Association, see no reason why public employees should be placed in the same category as workers in the traditionally more lucrative private sector.

“If individuals don’t make high salaries,” Baker says of public employees, “at least they have modest retirement benefits. If you’re going to cut that, you’re going to discourage potential teachers – people with bachelor’s or master’s degrees – from even considering entering the profession.”

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Text of draft ballot initiative:

OBJECTIVE:

In order to protect the government’s ability to: a) provide essential services to the public, and b) maintain retirement plans that are sustainable, fiscally-sound and able to meet the commitments to its employees, this initiative empowers the people of California to take the actions necessary to control the escalating costs of public employee retirement benefits.

INITIATIVE PROVISIONS:

This initiative defines that a government employee’s “vested rights” only applies to pension and retiree healthcare benefits earned for service already rendered, and explicitly empowers government employers and the voters to amend pension and retiree healthcare benefits for an employee’s future years of service.

– These provisions would apply to all future government employees.

– These provisions would apply to all current government employees, unless there is clear and convincing evidence that his/her employer intended to create a vested right to a particular level of retirement benefits for future years of service.

– The initiative would also allow all government employers to temporarily amend its retirement benefits for all employees’ future years of service if: a) they are facing a fiscal emergency or b) their retirement plan is “at-risk” according to the standards established by the federal government for private pension plans.

[Note: this provision remains subject to further refinement and discussion] For any public employee plan that is “at-risk” as defined by federal laws governing private pension plans, the government employer will be required to prospectively modify its employee pension benefits in such a way that will lift the plan out of “at-risk” status within XX years. If such action is not taken within two years, the government employer would be required to… (Potential Options: require employees to pay 50% of all pension costs, increase employee and/or employer contributions into the plan by XX, etc.)

Nothing in this initiative affects the retirement benefits that a government employee has earned and accrued for prior years of service.

Government employers and/or the voters would be required to wait until current labor contracts expire before adopting any changes to employee retirement benefits.

This initiative prohibits the State of California, CalPERS, and other government boards from interfering with elected leaders’ or voters’ ability to amend their public employee pension plans for employee’ future years of service (this includes prohibiting CalPERS from charging exorbitant termination fees to government employers who wish to amend their pension plans).

This initiative would apply to the State of California and all political subdivisions of the state, including, but not limited to, counties, cities, school districts, special districts, boards, commissions, the University of California, and California State University.

(Gary Cohn writes for Frying Pan News.)

By Gary Cohn

Benjamin Gamboa doesn’t know John Arnold, but they are linked by a shared concern over the fate of public-employee pensions in California.

“I’m proud to have a pension,” the 30-year-old Gamboa says. “I believe every American should have a pension.”

The two men live in very different worlds. Gamboa is a research analyst at Crafton Hills College in Yucaipa, California. Arnold is a hedge-fund billionaire from Houston, Texas.

There’s another difference between them: Arnold recently had a representative present at a secret “pension summit” held at a Sacramento hotel, where strategies to limit public employee retirement benefits were discussed; Gamboa, a union member, did not – representatives of labor were specifically not invited.

“Pension reform” has become the latest battle cry in a seemingly endless war that has ostensibly been declared against tax-dollar waste, but whose single-minded purpose has been to slash the job protections and benefits enjoyed by California’s working middle class. Pension-cutting advocates have filled airwaves, websites and op-ed pages with stories about employees retiring in early middle age on six-figure pensions. The reality is that the average state and municipal worker retires on about $26,000 a year.

The Sacramento summit took place May 22 at the Citizen Hotel, a luxury boutique inn two blocks from the state capitol. It was hosted by the Reason Foundation, a Los Angeles-based conservative and libertarian public policy group that embraces privatizing government functions and cutting public employee pensions. The foundation’s most prominent trustee is billionaire businessman David Koch, a longtime advocate of reducing public sector retirement benefits.

The meeting’s agenda – a copy of which was obtained by Frying Pan News – was written in the terse, opaque prose of event planners, but still offers a glimpse into the group’s plans. Among other items, it  lists an hour-long session on “Overcoming Opposition: Anticipating and Addressing Government and Union Opposition.” Perhaps the agenda was even more important for what it did not say: That the attack on public sector pensions may soon be transformed into a state ballot initiative that would change California’s constitution.

The participants in the closed-door meeting were Republicans and Democrats, and included public officials and representatives of numerous foundations and think tanks intent on reducing pensions for public employees.

Among those attending were San Jose Mayor Chuck Reed; former San Diego city councilman Carl DeMaio; Josh McGee, a vice president at the Laura and John Arnold Foundation; Marcia Fritz, president of the California Foundation for Fiscal Responsibility; Dan Pellissier, president of California Pension Reform; Ed Ring, executive director of the California Public Policy Center (CPPC) and editor of UnionWatch.org; Jack Dean, executive director at the Reason Foundation and editor of PensionTsunami.com, and Steven Greenhut, a journalist and author of the book Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.

Their gathering received no media coverage, with the exception of a brief mention in a column Greenhut wrote for the San Diego Union-Tribune. Despite the pension-cutting movement’s talk of the cause’s bipartisan pedigree, it seems to rely upon transfusions of money from wealthy rightwing personalities and nonprofits. Apart from the Reason Foundation’s close ties to David Koch, Greenhut’s own online hobby, CalWatchdog, is the creation of the Pacific Research Institute, a libertarian think tank with deep pockets.

Both the Reason Foundation and Pacific Research Institute are allied with the Koch-funded American Legislative Exchange Council (ALEC), which has been writing corporatist model legislation for about 30 years. More locally, however, the nexus for pension-cutting is the Tustin-headquartered California Public Policy Center, a conservative nonprofit led by Ed Ring, who worked to promote the anti-union Proposition 32 last year. CPPC’s advisors include Marcia Fritz and Jack Dean; its president is Mark W. Bucher who helped qualify and pass 2000’s Proposition 22, which effectively banned same-sex marriage in California. (Bucher is also a board member of Family Action, a rightwing Orange County political action committee.) Another CPPC board member, Robert Loewen, also serves as president of the ultraconservative Lincoln Club of Orange County.)

The Sacramento meeting apparently helped set the stage for moves that are now occurring largely behind the scenes.

In an interview, Reed confirmed that he attended the pension summit and that he has been working on a statewide ballot initiative that would allow the state and local governments to reduce retirement benefits for current employees for the years of work they performed after his proposed reforms would go into effect. He says that such statewide reform is necessary for California’s fiscal health, to ensure that the state and local governments can provide a reasonable level of services to the public and to protect public employees.

“What we need to do statewide is make it possible for local governments to change future accruals for work not performed,” he says. He adds that his proposed ballot measure could be voted on as early as November, 2014.

Reed, a Democrat who has opposed same-sex marriage and the raising of the minimum wage of his city’s workers, seems to be what pension-cutters have in mind when they speak of their movement’s bipartisan makeup. (The gathering’s other politician, Carl DeMaio, is a Republican – and Reason Foundation senior fellow – who has advocated replacing San Diego city employees’ pensions with a 401(k)-type substitute.) Last year Reed pushed a ballot measure in San Jose to reduce that city’s retirement costs for its public employees. The measure passed, but is now tied up in the courts. He acknowledges that any such measure is likely to provoke an all-out fight with the state’s public-employee unions. Interviews with labor officials and their representatives seem to bear him out.

A ballot initiative to cut back pensions for existing employees would “change the constitution and would be a horrible thing,” says Steven Maviglio, a publisher of the California Majority Report and a Sacramento-based political consultant whose clients include Californians for Retirement Security, a labor coalition representing 1.5 million public employees and retirees.

Maviglio says that many employees have worked for years at jobs where they were promised certain benefits and that it would be a breach of faith to “throw out that understanding and break that trust. That’s the whole foundation of pension benefits.”

He adds, “If someone is teaching for 25 years and somebody changes the rules of the game, that’s hardly fair.”

Any statewide ballot measure campaign aimed at cutting back public employee benefits would provoke an expensive fight with unions. “It would cost tens of millions of dollars – $30 or $40 million,” Reed says. Fritz, president of the California Foundation for Fiscal Responsibility (whose vice president is the CPPC’s Jack Dean), says that the backers would likely look for funding from the Arnold Foundation, among other sources.

The Arnold Foundation has funded similar efforts in the past. Two years ago, for example, the Center for Investigative Reporting revealed that the Arnold Foundation had given a $150,000 grant to Fritz’s group for a series of reports seeking to limit public employee pensions. Last year, another of the foundation’s checks made headlines when it was revealed that the Arnold Foundation was a major backer of Engage Rhode Island, the group that pushed through that state’s pension overhaul law.

The Arnold Foundation is clearly in the forefront of nationwide efforts to scale back pensions for state and municipal workers. On its website, the foundation identifies pension reform as one of its key initiatives, and it provides position papers supporting its stances.

“The current system has allowed politicians to promise one level of benefits without fully funding them,” the Arnold Foundation’s McGee told Frying Pan News in an email last week. “Across the U.S., state and local governments have underfunded workers’ benefits by at least $1 trillion.”

The Arnold Foundation, McGee wrote, works with state and local communities to provide policy information and technical assistance to help them develop pension reforms. He said that a ballot initiative is just one tool to improve the retirement system, and added that the foundation “does not promote or fund ballot initiatives.” He also acknowledged that he attended the pension summit in Sacramento.

“We discussed the need to deal responsibly with accumulated pension debt, secure benefits that have already been earned, and create a system that is affordable, sustainable, and secure,” McGee stated.

Others believe the Arnold Foundation has its eye on California in order to promote public employee pension cutbacks across the nation. The foundation’s thinking, Maviglio says, is that “if liberal California can do it, it can happen anywhere.”

In many ways, Benjamin Gamboa, the 30-year-old research analyst at Crafton Hills College, is typical of those employees who find themselves in the pension-cutters’ crosshairs. Working at a community college, he believes, is serving the public good by helping students to reach their goals.

“I love what I do, and I love the security of my job,” he says. “My plan is to retire with a pension just large enough to spoil my grandkids.” He says that his hope and expectation will be for a pension of about $30,000 a year. “I want to enjoy the simple things,” he says. “There are no European vacations in my future.”

He adds that he is concerned to hear about the continuing efforts to limit his and other workers’ pensions.

“To attack the work I do and the security I treasure . . .” he says, then pauses. “It’s heart-wrenching. It’s demoralizing.”

(Gary Cohn writes for Frying Pan News.)