CA unions want to roll back landmark pension reform

from Dan WaltersCalMatters

This comment was originally posted by CalMatters. Sign up for their newsletters.

The election of Gray Davis as governor in 1998 was something of a fluke.

Davis climbed the political ladder step by step, from serving as chief of staff to Gov. Jerry Brown to a seat in the state assembly, then a stint as state inspector and another as lieutenant governor.

The 1998 primary was a three-way Democratic campaign, pitting Davis against two wealthy, self-funded rivals, airline executive Al Cecchi and Jane Harman, a member of Congress from Southern California. Ceci and Harman poured millions of dollars into their campaigns, spending on media attacks against each other.

The press called it a “murder-suicide pact” that allowed Davis to win the nomination. Then he defeated Republican Attorney General Dan Lungren.

“We had a lot of interruptions in this campaign,” Davis’ campaign manager, Gary South, later admitted. One big breakthrough was that while Cecchi and Harman were big spenders, the state’s labor unions backed Davis with millions of campaign dollars.

It wasn’t unlike the gubernatorial race this year, when most unions rallied behind Xavier Becerra rather than billionaire Tom Steyer.

Davis was a politician with an accounting focus on political debts—who owed him and what he owed others. Accordingly, after the election, Davis quickly showed his appreciation by securing two high-priority—and expensive—increases in union benefits: one in unemployment insurance, the other in pensions for civil servants.

At the time, the public was told that both could be introduced without a material impact on employers or taxpayers, but both assurances later proved false.

When the Great Recession hit California half a decade later, unemployment insurance reserves were quickly depleted, and the program has survived ever since on loans from the federal government. The State Unemployment Insurance Fund now owes the feds over $20 billion.

The recession also crushed the earnings of the state’s two largest public employee pension funds, the California Public Employees Retirement System and the California State Teachers Retirement System, generating calls for the state to shore up their financial viability.

Davis wasn’t around when the privileges he accepted became overwhelming. In 2003, a year into his second term as governor, voters recalled him and elected Arnold Schwarzenegger as his successor.

The twin crises of unemployment insurance and pension benefits were left to Jerry Brown, Davis’ old boss, who won back the governorship in 2010. Brown did nothing about unemployment insurance, but in 2012 he pushed landmark pension reform through the Legislature.

The California Public Employees Pension Reform Act contained some borders of “pension jump“, but more importantly increased employee cost shares and reduced pension and benefit eligibility for future employees. The teachers’ pension fund was bolstered by increased contributions from the state and local school systems.

Unions that supported Davis disliked Brown’s reform, and some challenged it in court, particularly the crackdown on pension increases, but the lawsuits failed.

Fast forward 14 years.

Public employee unions, especially those representing police and firefighters, still resent Brown’s reform and are trying to loosen its restrictions on their pensions through Assembly Bill 1383which passed the Assembly on a 70-2 vote. Many Republicans voted for the bill, which is now being considered in the Senate.

deputy Tina McKinnerDemocrat from Inglewood, is carrying the measure for a coalition of public safety unions that say the reform has saved billions of dollars and outlived its usefulness. An equally large coalition of local governments has opposed the bill, citing its potential costs and how it would affect their budgets, but so far to no avail.

AB 1383 is being watched closely because if public safety unions can use the popularity of their members to overturn Brown’s reform, other unions will follow suit. The pension increase would expand unfunded liabilities – essentially multibillion-dollar unpaid debt – which still suffering from CalPERS even with the reform.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.