Landslide victories on ballot measures to cut pension costs in two major California cities emboldened reform advocates, who said they expect a flurry of copycat initiatives and increased support for Gov. Jerry Brown’s long-stalled push to curb the state’s obligations to its employees.
In San Jose, nearly 70% of voters Tuesday approved a plan that gives workers the choice between increasing their pension contribution to 13% of their pay, currently 5% to 11%, or switching to a lower-cost plan with reduced benefits. It also steeply cuts benefits for new hires and tightens rules for disability retirements.
In San Diego, where pension cuts already have been implemented, voters opted to eliminate pensions for new workers. By a 66% to 34% margin, voters Tuesday endorsed Proposition B, which provides newly hired city employees with a 401(k) program, but preserves traditional pensions for new police officers.
The San Diego measure also calls for a five-year freeze on “pensionable” pay levels and removes elected leaders’ ability to improve retirement packages without a popular vote. Leaders in both cities say voters were echoing a point that reform advocates have made for years.
“They understand the direct connection between skyrocketing pensions and the cuts in services we’ve suffered,” said San Jose Mayor Chuck Reed, the primary mover behind his city’s push for reform. “They recognize that the system is simply not sustainable.”
San Diego Mayor Jerry Sanders said Wednesday that he believed voters “understand that these pension systems are simply unsustainable. They were created during a different era when people did not live as long.”
Sanders, who leaves office at the end of the year, said he expects other cities to move to 401(k) plans. “They have to,” he said. “These pension programs are anachronisms.”
Compared to the tough measures approved by voters, Gov. Jerry Brown’s call to increase employee contributions to existing pensions and create a hybrid retirement system for new workers could seem like the better deal to union leaders who have resisted proposed changes, pension analysts say.
Local pension measures have enjoyed resounding success at the ballot. Before Tuesday’s vote, 18 measures to alter a pension system had passed, and only two had failed, both in San Francisco. On average, those measures passed with 62.7% of the vote, according to the California Foundation for Fiscal Responsibility, a pension-reform advocacy group.
City unions largely sat out Tuesday’s elections, saying they are concentrating their money and energy for the legal fight ahead. Labor groups in both cities have already filed lawsuits, and a police union in San Jose filed Wednesday, according to Reed.
“We could have spent $100,000, $1 million, or $10 million trying to educate people and it wouldn’t have helped,” said Michael Zucchet, a former San Diego City Council member and now general manager of the Municipal Employees Assn. “We could have shown people how this will not save the city any money but people would have said, ‘Yes, but it feels good to vote for it.’ ”
Labor groups in San Diego, backed by the state’s Public Employees’ Retirement System board, alleged in court that Sanders and the council were guilty of an unfair labor practice by declining to negotiate pensions during contract bargaining and putting the measure on the ballot.
California courts have consistently ruled that pension benefits, once given, cannot be taken away. Reform advocates say they are prepared to defend the measures in court.
“This is California and nothing important happens without litigation and we’re prepared for that,” San Jose’s Reed said. “We’re going to do whatever it takes to implement the will of the voters.”
Zucchet, in San Diego, said public employees have become scapegoats for broader financial problems. Tax revenues fell off a cliff during the recession and market returns on city funds have also fallen, he said.
Pension-cutting moves “play right into the extreme anti-public-employee politics of the day,” Zucchet said.
Marcia Fritz, president of the California Foundation for Fiscal Responsibility, which has pushed to rein in pension costs, said she hopes the Legislature will heed the public’s mood and support the governor’s 12-point reform plan.
If they fail to do so, voters could turn on the governor’s tax-increase proposal on the November ballot, or pass tough pension measures in cities across California.
“They can get on this train that’s picking up steam or they can stand on the tracks and get flattened,” Fritz said.