Pension Reform: Brown’s Next Step to Securing More Taxes | NBC Los Angeles

With the passage of the 2012-2013 state budget, Gov. Jerry Brown and his Democratic colleagues in the state legislature have taken a giant step toward securing voter approval of his proposed temporary taxes hike in November.

The key was not the budget numbers as much as those impacted by them: welfare recipients.

In politics, those in power frequently have to give something to get something. That’s why politics is sometimes defined as “the art of compromise.”

In Brown’s case, his compromising efforts are with the public since legislative Republicans have stubbornly refused to play ball.

Brown desperately wants the voters to approve his temporary tax hike in the fall, but he also knows that voters still believe that most of the state’s budget problems stem from questionable expenditures rather than inadequate revenues. Regardless of the merits of such a claim, it’s the perception that counts.

Which takes us back to welfare reform. Social welfare programs consume about one-fourth of the state general fund.

As such they attract a good deal of public attention and criticism. Bearing in mind the public’s hostility, Brown and the Democratic majority agreed to reduce the time that families could be on the state welfare-to-work and child care programs to two years from four years, saving about $600 million in the process.

Needless to say, the governor and his allies will catch plenty of flak from liberals, the heart of the Democratic Party, but it appears that they made this miserable choice in hopes of gaining public support for their proposed temporary taxes.

Brown now has one more card to play to sweeten the deal: pension reform. Between now and Nov. 6, we can expect Brown and the Democratic majority in the legislature to enact new rules that reduce the state’s commitment to public employee retirements.

The details remain sketchy, but no doubt the changes that emerge will touch mostly on future employees either in the form of new payment formulas, increased employee contributions, or payment caps — or perhaps a combination of all three. The point is there will be pension reform of some kind.

If we take a step back and look at the big picture, some of this begins to make sense in the form of Brown’s proposed “grand bargain” with the voters.

That’s the trade: welfare cutbacks and pension reform for more taxes to keep public education afloat.

Whether the public goes along on Nov. 6 remains to be seen, but Republicans have already won by the governor bowing to two their long-term issues.

via Pension Reform: Brown’s Next Step to Securing More Taxes | NBC Los Angeles.

Closures tied to pension reform?

Even though he was successful in shutting down state parks for a while, Gov. Rod Blagojevich became like the little boy who cried wolf when it came to talking about closing state institutions.

Everyone knew it was mostly just talk designed to extract some kind of deal from the General Assembly.

That’s why some Springfield insiders last week were raising the specter that Gov. Pat Quinn’s plan to close prisons in Tamms and Dwight, a youth facility in Murphysboro, developmental centers in Jacksonville and Centralia and halfway houses in Decatur and Carbondale is merely a ploy to garner support for an overhaul of the state’s deeply underfunded employee retirement programs.

Most of the targeted facilities are in legislative districts represented by Republicans, who are reluctant to go along with the governor and Democrats in a plan to shift the cost of providing state workers with retirement benefits from the state to local school districts.

The Tamms supermax prison is represented by two pro-union, pro-gun Democrats — state Rep. Brandon Phelps of Harrisburg and state Sen. Gary Forby of Benton — who aren’t typically inclined to support a plan that would reduce benefits for unionized state workers.

To be sure, not all of Quinn’s closure threats are being driven by the possibility of trading votes. He and his administration have been clear in saying they want to close centers housing developmental disabled Illinoisans in favor of smaller group home settings. And, he and his administration also have made it clear they think the Illinois Department of Juvenile Justice should be downsized.

That likely spells doom for the Illinois Youth Center in Murphysboro and the Jacksonville Developmental Center, no matter what kind of deals might be in the offing.

The fate of the other facilities is less clear.

The drumbeat to close Tamms has been strong since Quinn took over, but the General Assembly gave him money to not only keep it open, but to retrofit it to become a less controversial minimum- or medium-security facility.

Closing Dwight Correctional Center is opposed by Republicans and Democrats alike and could result in even more overcrowding within the state’s over-stuffed prisons.

For now, pension overhaul talks are taking place behind closed doors. There are murmurs that nothing might happen until after the November election, when there will be a larger-than-usual number of lame duck lawmakers unburdened by a need to please their constituents back home.

The Quinn folks gave somewhat conflicting answers last week about whether some of the facilities could be kept open if a pension deal is reached.

One Quinn mouthpiece initially said there is no link between pensions and the closures because any pension reform done this year won’t necessarily have an effect on other state spending.

Later, Lt. Gov. Sheila Simon, issued a statement seemingly linking the two issues:

“While his decision to downsize corrections and juvenile justice facilities and restructure Medicaid brings Illinois closer to living within our means, we must achieve meaningful pension reform to end the squeeze on funding for public safety, education and other critical services,” she said in a statement.

Quinn then came along Thursday and put a price tag on the inaction, saying every day that goes by without pension reforms adds $12.6 million to the unfunded pension liability — even though the state is already poised to fully pay this year’s pension obligation.

As it stands now, pension talks are on hold until early August. The facilities targeted by Quinn are scheduled to close Aug. 31.

Chip on shoulder

It sure sounds like it wouldn’t take much for Forby, a Democrat, to join with state Rep. Bill Mitchell, a Forsyth Republican, in pushing a bipartisan plan to make Cook County the 51st state.

In a statement issued Tuesday after Quinn’s plan to close Tamms emerged, Forby again played to the anti-Chicago fervor of his district’s voters — a move that Mitchell has already perfected in central Illinois in recent months.

“It is stunning and sad the lengths this governor will go to punish southern Illinois. It’s as if he is cutting off his nose to spite his face,” Forby said in a statement.

via Closures tied to pension reform?.

Joe Soucheray: St. Paul superintendent just needs to hear ‘no’ – TwinCities.com

The St. Paul school super, Valeria Silva, stuck her elbow in the ribs of the school board the other day and asked them to find her $9 million when the district goes to the polls in November. The district — I see a large bearded figure with a robe and a crown — is seeking an eight-year renewal of its $646-per-pupil operating levy, and Silva wants that bumped by $175. Thus the $9 million increase for property taxpayers.

What does that even mean? We already pay more than $10,000 per pupil a year. These per-pupil operating levies are euphemistic for add-ons, stuff from the options list. Hey, give us another couple of hundred bucks a kid and we’ll throw in pencils.

Well, it’s not pencils this time on the options list. It’s technology, or “harnessing technology to individualized instruction.” I don’t know what that sounds like to you, but to me it sounds like “let’s buy everybody an iPad.”

No. How about no for a change? How about living within the means of your already astonishing, chest-thumping, holy-mackerel-of-a-whopper $655.8 million budget for the coming school year? You have enough and yet you keep coming to people who see the value of their homes in decline while their property taxes increase.

No. Or to echo Margaret Owen Thorpe’s letter to the editor in Tuesday’s Pioneer Press, “No. No. No. Is there any part of ‘no’ that Ms. Silva does not understand? The toy store is closed. Sorry. No more toys. Mommy is broke.”

These supers and their

acolytes live in a parallel universe, figuratively and literally. Have you ever seen a super? I mean, at the hardware store or the coffee shop or Target or the gas station? Silva’s predecessor, Meria Carstarphen, lived on Summit Avenue, near Fairview Avenue. That’s not exactly at the end of a lonely dirt road out in the country. I conducted exhaustive polls during her tenure and I never found a single person from that neighborhood who ever saw her.

I don’t know where Silva lives and it’s really none of my business. I do know that we paid to move her into town from Woodbury.

In other words, do the school officials ever mix with the people who pay the bills, or are they always surrounded by their own kind, bustling from meeting to meeting with the forward of them making a flying wedge for the super while their smartphones beep and sing in unison?

Silva put her hand out just as I was coming to the realization that we are feeding nearly every kid in town. I knew that we have been feeding kids for years through various programs that I naively assumed had targeted truly needy children who weren’t getting food at home.

I didn’t know that we are feeding everybody. Income doesn’t matter. That breakthrough is probably to accommodate self-esteem issues. The school district, acting in concert with St. Paul Parks and Rec, is feeding anybody who wants to eat, birth to 18 years old. In St. Paul, 28 rec centers are providing meals all summer long, breakfast, lunch, snack and supper, depending on the rec center.

After countless phone calls, I discovered that the so-called free food is federally funded through the Department of Agriculture and administered through the State Department of Education’s Food and Nutrition Service. Why, it’s free! No, it isn’t. Nothing is free. And if you are wondering why the state is feeding a kid at Hillcrest Recreation Center in Highland or at Linwood Recreation Center in Crocus Hill, you are also starting to have your eyes opened.

While we have not been paying attention, an entirely new government empire has grown out of whole cloth, the government nutrition empire, which wants to feed everybody, from Mac-Groveland to Dayton’s Bluff. I suppose there is the subtext of the government fighting obesity, but that is laughably preposterous, as it results in sending a kid to a playground to eat instead of playing baseball.

Like Silva blithely wanting $9 million for “technology,” “free food” is another bell or whistle from the options list that we can’t afford.

via Joe Soucheray: St. Paul superintendent just needs to hear ‘no’ – TwinCities.com.

Huff’s Attempt to Get Vote on Pension Reform Fails – Arcadia, CA Patch

After attempts to get two pieces of legislation related to pension reform through the committee process failed, Sen. Bob Huff

 decided to take the bills directly to the Senate floor this week.

Frustrated that the bills were bogged down in the committee process, the Republican Senate Leader, R-Diamond Bar, called on his colleagues to vote on his proposed legislation.  The Senate opted not to vote on the pension reform measures or debate the issue, something Huff said is an effort on the Democrats’ part to shut out Republicans.

“You had an opportunity to bring the Governor’s public pension reform plan to the Senate Floor, to debate it in the open and you said no,” Huff said in a statement. “You don’t want to have a debate in public. You want to work on a secret plan behind closed doors, away from public view.”

Senate President Pro Tem Darrell Steinberg, D-Sacramento, told the Sacramento Bee last month that pension reform is still very much on the table, although the time frame for when negotiations would be done and a comprehensive package completed is unknown at this time.

This is not the first time Huff has voiced disappointment that pension reform is not moving at the pace he would like.

In April, he lamented the failure of two proposed pension reform bills, one on the Senate side and another considered by the Assembly, to gain any traction with state lawmakers.

In February, Huff and several other lawmakers held a press conference announcing support for Gov. Jerry Brown’s pension reform plan.

Huff had authored Senate Constitutional Amendment 18 and Senate Bill 1176, which complemented similar measures proposed on the Assembly side.

The governor’s plan calls for public employees to contribute more to their pension, raises the retirement age, and reduces benefits for new hires, among other changes.

“It’s time to fix our pension systems so that they are fair and sustainable over a long time horizon,” Brown said in October. “My plan raises the retirement age and bans abusive practices like ‘spiking’ and ‘air time’ while mandating that public employees pay an equal share of pension costs.”

via Huff’s Attempt to Get Vote on Pension Reform Fails – Arcadia, CA Patch.

San Jose Mayor Chuck Reed makes mark with pension reform – San Jose Mercury News

San Jose Mayor Chuck Reed’s phone has been ringing a lot lately: the New York Times, Wall Street Journal, Time, Fox, Vanity Fair and mayors from Los Angeles to Louisville.

Reed ran for mayor in 2006 with an unremarkable budget-balancing agenda for a city perhaps best known in song as a place you might not know the way to, even if it is the nation’s 10th largest.

Now his sweeping pension reform measure has put San Jose on the national map with its overwhelming voter approval this month, drawing interest from city officials across the country who see Reed as a leader in grappling with a national epidemic of employee retirement bills that outpace revenues.

“It’s being watched closely,” said Greg Fischer, mayor of Louisville, Ky. He leads a U.S. Conference of Mayors committee looking at pension problems, and called going to voters for pension cuts that unions refused a bold but “realistic” move. “You’ve got to change something here or you’re going to go out of business,” he said.

National publications touted Reed’s measure, a similar one in San Diego and the failed recall of Wisconsin’s governor as signs of voter backlash against unions resisting cuts to generous government perks. A Vanity Fair piece featured Reed with former Gov. Arnold Schwarzenegger and the fire chief in bankrupted Vallejo as leaders struggling with governments that promised more than they can now afford.

Reed, 63, with two and a half years left in office,

admits the eye-glazing matter of pension reform wasn’t his top choice for leaving a political mark. Politicians like to leave things for people to admire, like his predecessor who built the new City Hall with its landmark glass rotunda.

Reed opposed the new building over its high cost.

But when asked why he’s taking point on efforts to pare back public employee pensions, Reed hearkens back to his Vietnam War-era military career in the U.S. Air Force, something that has shaped his persona.

“Duty, honor, country,” Reed said in is top-floor office, where the Air Force theme resonates.

“I didn’t pick this as a reason to get involved in government,” Reed continued. “But it landed on my desk, and I have to deal with it. I want to hand off a City Hall that’s fiscally sound and solid to the next mayor.”

Reed’s critics include the city’s unionized workers, retirees and fellow Democrats who have long linked arms with organized labor and see Reed as a Republican in donkey drag. To current and retired city workers, he’s like the government leaders who broke treaties with tribal chiefs.

“It takes a certain mayor and City Council to say we’re just going to renege on what we promised people,” said Jim Unland, president of the San Jose Police Officers’ Association. “They don’t have a whole lot of honor.”  read more…

via San Jose Mayor Chuck Reed makes mark with pension reform – San Jose Mercury News.

Marin Voice: Public pension reform and how we got to this point – Marin Independent Journal

THE PRESENT state of California’s public employee pension system is the result of legislation sponsored by the California Public Employees Retirement System in 1999 under Senate Bill 400 and expanded in 2001 under Assembly Bill 616.

CalPERS argued that its members and retirees were not equitably benefiting from the high investment returns during the 1990s.

The Legislature voted 105-7 to grant all public employees, which include public safety and education, a new formula that increased the percentage applied to each year of service and lowered the age in which an employee is eligible to retire. These new benefits were retroactive and SB 400 also provided a one-time cost of living adjustment for retirees.

Prior contribution levels were calculated over the actuarial life of the employee and did not take into account increases made mid-stream. To offset the cost and future liability of these new benefits, CalPERS proposed to (1) use the surplus generated by the investment returns and (2) make accounting changes to recognize excess assets quicker in order to reduce the impact of these enhancements on the employer’s contributions.

In effect, excess returns, which should have been used to offset shortfalls during periods of underperformance, were used to fund higher benefits.

SB 400 was passed before it could be reviewed by the Legislative Analyst’s Office. In a report issued by the LAO more than

two months later, it was stated (1) the new compensation package would cost $286 million and increase to almost $1.3 billion when all full-year costs were realized and (2) the annual cost of the retirement benefits would be more than $400 million. There were no economic forecasts at the time to suggest if SB 400 was even feasible or not.

In 2004, the LAO issued another report stating the employer contribution had escalated from under $200 million to $2.6 billion in just under four years. The report cites (1) less than expected investment returns and (2) the increased level of benefits under SB 400.

The costs and unfunded liability continues to grow as a result of the Great Recession and slow recovery. Although the assumed rate of return on investments was lowered from 8.25 percent to 7.75 percent in 2003 and to 7.5 percent recently, it does not change the future obligation. It just means the employer has to make a larger annual contribution.

In 2009, Ron Seeling, then chief actuary of CalPERS, stated the system was unsustainable. Terry Brennand, a senior government relations advocate from SEIU, disagreed and blamed a bad economy. Regardless, it will take annual returns in excess of 20 percent to be fully funded again by the end of the decade. Cities will be in severe financial distress or near insolvency before then.

Last October, Gov. Jerry Brown proposed his 12-point plan for pension reform. Little has been made of the plan in Sacramento. Conceptually, there will be some immediate reduction in pension costs, but the benefits of the most significant changes will not be realized for years, if not decades. With the governor’s push for a tax increase on the November ballot, don’t expect to see pension reform before then.

On June 5, voters in San Jose and San Diego approved measures that would reduce the benefit levels of their municipal employees. As charter cities (which 10 of 11 Marin cities are not), they can put it to a referendum. Labor groups are certain to challenge these on the basis that the courts have historically ruled that it is illegal to reduce vested benefits without offering something comparable in return.

Pritchard, Ala., seemed to have the most practical solution. When the cash ran out, the town simply stopped writing the checks.

via Marin Voice: Public pension reform and how we got to this point – Marin Independent Journal.

Midwest Sugar-Beet Workers Reject Contract – WSJ.com

A majority of union members voted down American Crystal Sugar Co.’s contract for a third time on Saturday.

According to Mark Froemke a representative from the American Federation of Labor, 63% of the union members who voted opted to reject it.

“The workers’ voice was loud and clear.…I hope it means that American Crystal Sugar and the union can sit down, negotiate and come to a reasonable conclusion to this 11-month walkout,” said Mr. Froemke, 56 years old. “We as workers needed to send a message that we will not be browbeaten into a substandard contract.”

American Crystal Sugar Co. Chairman Robert Green, 58, who owns a beet, wheat and navy-bean farm in North Dakota, said that the company will continue to move forward after Saturday’s vote.

“We are quite happy with the new workforce, and they are learning the job. We think they’ll do just fine,” Mr. Green said Saturday evening.

Corrections & Amplifications

Union members voted down American Crystal Sugar Co.’s contract for a third time on Saturday. An earlier version of this article and summary said the vote was Sunday.

via Midwest Sugar-Beet Workers Reject Contract – WSJ.com.

GREENHUT: High court rebukes union totalitarianism « Watchdog News

SACRAMENTO – For people who truly are interested in a just and fair society, there’s one easy way to sort through some seemingly complex issues: turn the tables. If, for instance, one is debating a controversial law affecting a particular group, it’s best to think about how fair it would seem if that law were applied in the same way to you.

On Thursday, the U.S. Supreme Court issued a verdict in the case of Knox v. Service Employees International Union, Local 1000, showing how deeply it understands that basic concept. By a 7-2 vote, the high court slapped down the union for deducting money from its employees’ paychecks and using it to fight against two California campaign initiatives – without giving its nonmembers a chance to opt out of these political campaign contributions.

Critics of the decision are blasting it, as one union official put it to the Sacramento Bee, as another “attack on the right of public sector workers to act collectively.” But let’s apply our test to these outraged union spokespeople. What if their money was deducted by force from their paycheck and used to support conservative tax-limiting initiatives or Republican candidates? Would they be OK with that? We know the answer.

Fortunately, the Supreme Court recognized by a 7-2 vote – with two liberal justices dissenting – the enormous free-speech issues at stake here. Ruled the court, “Public-sector unions have the right under the First Amendment to express their views on political and social issues without government interference. … But employees who choose not to join a union have the same rights. The First Amendment creates a forum in which all may seek, without hindrance or aid from the State, to move public opinion and achieve their political goals. ‘First Amendment values [would be] at serious risk if the government [could] compel a particular citizen, or a discrete group of citizens, to pay special subsidies for speech on the side that [the government] favors.’ United Foods, 533 U. S., at 411. Therefore, when a public-sector union imposes a special assessment or dues increase, the union must provide a fresh Hudson notice and may not exact any funds from nonmembers without their affirmative consent.”

read more…

via GREENHUT: High court rebukes union totalitarianism « Watchdog News.

Supreme Court Holds that Public Sector Unions Must Provide Nonmembers Notice and Opportunity to Opt Out of Special Assessments or Fee Increases | Ford & Harrison LLP – JDSupra

Executive Summary:  Calling the SEIU’s “aggressive use of power to collect fees from nonmembers indefensible,” the U.S. Supreme Court, in a 7-2 decision, has held that the union violated the First Amendment by not sending a new Hudson notice when it levied a special assessment to meet expenses that were not disclosed when the amount of the regular assessment was set.  SEIU v. Knox (June 21, 2012).  A Hudson notice provides nonunion employees the opportunity to object to the use of their dues for political purposes and the opportunity to opt out of the contribution of the funds.  The Court held that “when a public-sector union imposes a special assessment or dues increase, the union must provide a fresh Hudson notice and may not exact any funds from nonmembers without their affirmative consent.”

Discussion

Under California law, public-sector employees in a bargaining unit may decide by majority vote to create an “agency shop” arrangement under which all the employees are represented by a union selected by the majority. While employees in the unit are not required to join the union, they must nevertheless pay the union an annual fee to cover the cost of union services related to collective bargaining (chargeable expenses).  The Supreme Court has recognized that such arrangements impinge on nonmembers’ First Amendment rights.  While public sector unions can bill nonmembers for chargeable expenses, they may not require nonmembers to fund their political and ideological projects.   In Teachers v. Hudson, 475 U.S. 292 (1986), the Court identified procedural requirements unions must meet in order to collect fees from nonmembers without violating their First Amendment rights.

In this case, the SEIU sent out a regular Hudson notice informing employees what the agency fee would be for the year ahead and estimated that 56.35% of its total expenditures in the coming year would be dedicated to chargeable expenses.  Thus, if a nonunion employee objected within 30 days to payment of the full amount of union dues, the objecting employee was required to pay only 56.35% of total dues.  The notice also stated that the agency fee was subject to increase at any time without further notice.  Subsequently, the SEIU levied a special assessment to pay for the funding of a coalition of public sector unions opposing two ballot propositions (75 and 76).  Proposition 75 would have required unions to obtain employees’ affirma­tive consent before charging them fees to be used for polit­ical purposes. Proposition 76 would have limited state spending and would have given the Governor the ability under some circumstances to reduce state appropriations for public-employee compensation.

In finding that the union should have sent a new Hudson notice with the special assessment, the Court noted that “closely related to compelled speech and compelled association is compelled funding of the speech of other private speakers or groups.”  The Court acknowledged that the primary purpose of permitting unions to collect fees from nonmembers is to “prevent nonmembers from free-riding on the union’s efforts, sharing the employment benefits obtained by the union’s collective bargaining without sharing the costs incurred.”  The Court noted, however, that the free-rider argument generally is insufficient to overcome First Amendment objections.  The free-rider justification is permitted in the context of union dues as an “anomaly” that is justified by the interest in furthering labor peace – “it is an anomaly nevertheless.”

via Supreme Court Holds that Public Sector Unions Must Provide Nonmembers Notice and Opportunity to Opt Out of Special Assessments or Fee Increases | Ford & Harrison LLP – JDSupra.

Letter: Pension reform’ will be costly – Springfield, IL – The State Journal-Register

People, be aware of something that will be happening very soon with your taxpayer dollars. By passing these so-called “pension reform” bills, they are setting up the state of Illinois to lose billions more of your taxpayer dollars.

Go out and search on “state pension lawsuits.” There are currently seven states that are trying to enact pension reform and are being sued. In pretty much every case, the state has lost or is losing on appeal when it comes to decreasing benefits for employees who have already retired. In other words, you can’t go back and change retirement benefits employees earned after they’re retired.

At issue in some states is whether or not a state employee and the state have an employment/pension contract. Not in Illinois. The Illinois Constitution explicitly states, “Membership in any pension or retirement system of state, any unit of local government or school district or any agency of instrumentality thereof, shall be an enforceable contract  relationship, the benefits of which shall not be diminished or impaired.”

I have heard that some legislators think they will win the lawsuits because they are offering the retirees a choice. A choice between shooting yourself in the head and jumping off a cliff is not a choice! Both choices diminish retiree pensions.

I’m no lawyer, but it seems the state of Illinois has a slim chance of winning the inevitable slew of lawsuits that the passing of these bills will cause. Here’s where billions of your tax dollars come in.

The state of Florida has already spent $860 million — yes, almost a billion — dollars defending its pension reform and has lost and is appealing to a higher court.

I suppose when the state loses and we are billions more in the hole, it will be the state employees’/retirees’ fault again.

— Scott Mauck, Dawson

via Letter: Pension reform’ will be costly – Springfield, IL – The State Journal-Register.