Brown, Democrats fail to reach pension reform deal – San Jose Mercury News

SACRAMENTO, Calif.—The governor said Tuesday he could not reach a deal with Democratic leaders on sweeping public pension reform and suggested talks continue during a monthlong recess that begins at the end of the week.

Gov. Jerry Brown issued a comprehensive proposal last fall that focused on raising the retirement age and moving new workers to a hybrid pension system. Democratic leaders did not send him their plan until last Sunday and have not made it public.

“The governor could not agree to some of the changes in the pension counterproposal,” Brown’s spokesman Gil Duran said in a statement. “These complex issues cannot be resolved in two days and he has asked the Legislature to continue to work with him over the recess to resolve the substantial differences.”

Assembly Speaker John Perez said Democrats would keep working on passing a proposal before the legislative session wraps up at the end of August.

“The Assembly has been working diligently to finalize a pension proposal that not only satisfies the 12 points of the governor’s plan, but also goes further in finding needed reforms” that create savings and other benefits, Perez said in a statement.

Pension reform supporters have been hoping to build momentum for statewide changes after voters in San Diego and San Jose overwhelmingly passed sweeping changes in those cities last month.

Brown’s announcement Tuesday suggests the majority party still has work to do to satisfy his

demands for a comprehensive package to help contain rising pension costs. Critics say the costs are unsustainable and are starting to compete with public education and other programs for limited state and local funds.

“They continue to mess around and not get the people’s business done,” said Joel Fox, president of the Small Business Action Committee, which is campaigning against Brown’s tax initiative on the November ballot.

Fox said if lawmakers were serious about reform, they would have sought to put changes on the fall ballot before the June 28 deadline for that move.

The state said pension contributions accounted for 2.4 percent of state spending in 2006. It’s expected to reach 3.9 percent this year.

The California Public Employees’ Retirement System, the nation’s largest public pension fund, has an unfunded liability of around $85 billion. The California State Teachers’ Retirement System has about $64.5 billion in unfunded liabilities.

Labor leaders said it’s important for Brown and lawmakers to get details right.

“Both the legislative and governor’s proposals are deeply flawed and deserve public scrutiny that the next few weeks will allow,” said Dave Low, chairman of Californians for Retirement Security, a coalition of unions.

The governor wants to increase the retirement age from 55 to 67 for new, non-public safety employees, and have local and state government workers pay more toward their pensions and retiree health care. Newly hired public safety employees would have to work beyond the current minimum retirement age of 50 depending on their ability to perform the job.

Brown’s proposal would put new workers in a hybrid plan in which guaranteed benefits are combined with a 401(k)-style plan that places some risk on the employees.

Brown’s finance department has estimated that his changes would reduce the state’s contributions by $4 billion to $11 billion over the next 30 years if the plan is implemented. Other aspects of government—from courts and schools to cities and counties—would see their own savings, too.

Assemblyman Warran Furitani, co-chairman of the Legislature’s pension committee, said Democrats have embraced most of the governor’s proposals but have offered alternatives on how to raise the retirement age and want changes to the hybrid system.

Democrats are willing to cap the amount an employee can receive from the pension fund and are willing to raise the retirement age for an employee to collect full benefits, but don’t want to prevent people from taking early retirement if they are willing to accept a smaller pension, he said.

“It’s going to be a sliding scale with a minimum of hurt for the people that retire early,” Furitani said. “If you stayed until 67, you’ll be able to get a sweetened amount that’s extra.”

He said Democrats have added some of their own changes as well. For example, they want to allow local government to negotiate employee contributions through collective bargaining. Brown wants to mandate employees pay half of their pension costs.

Furitani said lawmakers agree with the governor’s proposals to end pension spiking.

The governor wants to state and local governments to calculate benefits based on the highest average compensation for three years, rather than one year. And he wants to ban counting unused vacation time, overtime and other bonuses in calculating base benefits.

The governor also wants to require new state employees to work for 15 years to become eligible for retiree health benefits, and 25 years for maximum health care premium coverage.

via Brown, Democrats fail to reach pension reform deal – San Jose Mercury News.

District 39 announces state postponement of pension reform –

WILLMETTE— School District 39 Superintendent Ray Lechner gave board members updates on a number of areas at the board of education’s June 25 meeting, including pension reform and the district’s strategic plan.

In announcements, Lechner thanked the Highcrest PTO for its $10,000 donation to science improvements at Wilmette Junior High School. He also recognized the partnership with the Educational Foundation’s goal to raise $110,000 over two years to support the project with enrichment activities and advanced technology.

Lechner noted that there is no news to report on pension reform in Illinois and the state is postponing a decision.

Lechner also introduced the Connected Strategic Plan update. Each June, following the Community Review Committee report, the administration provides an update on progress of the strategic plan. Melanie Goffen Horowitz, administrator for curriculum and instruction, detailed the year’s accomplishments, highlighting the progress in each of the four goal areas: learning, core subject and content, structural platform, and measurement.

Lechner also introduced a review of the Highcrest Middle School and Wilmette Junior High School Leadership Model. He noted that the goal is to develop a one-campus educational experience where students in grades five through eight can experience a smoother transition with improved cross-campus connections.

Lechner also noted the board must adopt a tentative budget at least 30 days prior to a public hearing and the adoption of a final budget. He added that fund balances are exactly where they were projected to be before voters approved 2011’s tax referendum. The board approved the tentative budget and a public budget hearing.

Lechner noted the district continues to serve as the fiscal agent for the partnership between District 39 and Avoca District 37 in the Wilmette Community Special Education Agreement. As a result, District 39 is responsible for the WCSEA budget according to the same guidelines as its own budget cycle. He then presented the WCSEA tentative budget for 2013, which was approved by the board.

In other action, the board approved: the Personnel Report dated June 25, 2012; Lechner’s 2012-13 contract amendment; an amended budget for 2012 fiscal year; the Illinois Prevailing Wages; a playground mulch bid; and a window bid.

via District 39 announces state postponement of pension reform –

Here’s How You Should Pass These Taxes We Don’t Want | NBC Southern California

I will try to stop you from doing what you want to do. But first let me tell you how to do what you want to do.

That may sound strange, but it’s the peculiar political narrative in California these days.

Republicans hate taxes and will oppose any attempt to raise taxes, even if just in conversation. But they also keep giving public advice to Democrats about how to pass the taxes.

My friend Joel Fox, a writer who is former president of the Howard Jarvis Taxpayers Assn. and leads the Fox & Hounds web site, is among the leading of practitioners of this “here’s how to do the thing you shouldn’t do” style of counsel. The state needs budget reform via spending limit, before Democrats should move forward with tax increases he’d oppose.

The subject where Republicans really pull this rhetoric trick is on pensions. They are constantly declaring that voters won’t support tax increases without pension reform first. To be sure, some Democrats are saying this too — but those Democrats presumably want taxes to pass.

Republicans may be right in this political advice. They may be wrong. But it’s the kind of advice that parents — bad parents — give their kids. If you’re going to do the wrong thing, kid, here’s how to do it.

Does that make the GOP California’s bad mother?

via Here’s How You Should Pass These Taxes We Don’t Want | NBC Southern California.

Con Ed lockout heats up as manager filling in for union worker is burned at Brooklyn substation – NY Daily News

A Con Ed manager filling in for a locked-out union worker was burned in a substation fire in Bensonhurst Monday.

The utility played down the man’s injuries.

“Someone got slightly hurt. They were treated and released,” said Con Ed spokesman Michael Clendenin. “Look, this is dangerous work. That’s why we’ve got experienced managers. They know what to do.”

The union, which has said the managers were mostly desk jockeys who couldn’t handle manhole explosions and pole fires, predicted more would get hurt.

Union spokesman John Melia was blunt: “They’re going to kill somebody.”

Contract talks that broke down Saturday night are set to resume Thursday.

But the bitterness underlying the standoff runs deep.

At one point Saturday night, as the union’s contract was running out, tempers flared at the negotiating table in the Rye Brook Hilton over cuts to medical benefits.

“Is that the way we treat our family?” demanded Robert Stahl, the union’s senior business agent.

Human Resources VP Mary Adamo told him, “We’re not a family.”

“I even wrote it down in my book, ‘June 29 at 8:15 p.m.: the company says ‘We’re not a family,’” Stahl said.

The dispute over medical cuts, pay freezes and the company’s move to convert pensions to 401(k) accounts continued past the midnight deadline.

At 1:30 a.m. Sunday, after the union refused Con Ed’s request for a 14-day contract extension and a seven-day advance warning of a strike, the utility told the union workers to go home.

“They were asking us to surrender the little leverage the union has,” Melia said.

“We were willing to work without a contract — but they fired us,” Stahl said.

The utility locked out 8,500 workers, saying 5,000 managers stood ready to keep the city’s lights on.

Con Ed’s spokesman said the utility was just trying to modernize its retirement benefits.

“There have been changes in the way pensions are calculated in many companies for a long, long time now,” Clendenin said. “We’re always hopeful that we can work out the differences.”

Union members say the utility, which last year won approval to increase rates by 10% and which has seen its stock price and profits soar, is too flush to squeeze workers.

About 100 workers — some wearing T-shirts that said “If we go out, the lights go out” — picketed and heckled outside Con Ed headquarters near Union Square.

Outside the Con Ed plant on White Plains Road in the Bronx, workers handed out flyers spotlighting Con Ed CEO Kevin Burke’s $11 million salary.

“We’re fighting for our lives. We’re not asking for anything more than we already have,” said utility worker Paul Grassi, 33.

Despite the heat wave, no major outages were reported across the city. City Council Speaker Christine Quinn called on Con Ed to end the lockout and on the union to agree to “a reasonable walkout notice provision.”

via Con Ed lockout heats up as manager filling in for union worker is burned at Brooklyn substation – NY Daily News.

Fresno Mayor Rejects Police Union’s Contract Proposal – KMPH FOX 26 | Central San Joaquin Valley News Source

FRESNO, Calif. (KMPH) –

Fresno Mayor Ashley Swearengin let it be known Monday that the city was ready for “hardball” now in its effort to cut costs.

“We can no longer afford costly contract extensions. We simply cannot afford it,” the mayor said.

At a news conference in Downtown Fresno, Mayor Swearengin expressed deep appreciation for the city’s police officers, but then when on to reject the Fresno Police Officers Association’s latest counter-proposal of a one-year contract extension.

Swearengin says that extension would have saved money in the short term but would have cost the city an additional ten million dollars in the long run.

The city is looking to close a 16 million dollar budget gap.

The police union’s contract does not come up for renegotiation until 2015.

via Fresno Mayor Rejects Police Union’s Contract Proposal – KMPH FOX 26 | Central San Joaquin Valley News Source.

Roy Roberts issues order to impose new Detroit teachers’ contract | City of Detroit | Detroit Free Press |

After the clock ran out on the Detroit teachers’ contract, Detroit Public Schools Emergency Manager Roy Roberts on Sunday issued an order to impose a new one, essentially dictating work rules and pay.

The move comes days after the teachers’ union president left open the possibility of a teachers’ strike in Detroit in the fall.

Roberts, the state-appointee with authority over DPS, utilized his powers under the controversial emergency manager law to create what he called the Successor Collective Bargaining Agreement between the School District of the City of Detroit and the Detroit Federation of Teachers. The prior union contract expired on June 30. Roberts’ action follows a series of meetings with the DFT in June, according to DPS.

In a statement released Sunday, Roberts said having the new contract in place provides teachers “the stability they need and deserve.”

“This new collective bargaining agreement with our teachers provides the flexibility needed for our schools to be successful and to meet the educational needs of the children and families who come to us. It also produces the savings necessary for the district to ultimately return to financial solvency and remove the debt that erodes financial resources reaching the classroom.”

On Friday, with only hours left until the teachers contract expired, Keith Johnson, president of the Detroit Federation of Teachers union, said he was not happy with the direction of negotiations.

Teachers strikes are illegal in Michigan, but difficult to prevent in the state’s largest school district. When faced with cuts in 2006 as principals were getting raises, the DFT called a strike that canceled classes for nearly two weeks.

“In 2009, I made a commitment to the community that school would start on time,” Johnson told the Free Press Friday. “This time, the commitment I am making is that we will work with the district to do right by its employees. Not the same commitment,” made in 2009.

Roberts did not release the terms of the imposed contract, however, it is likely to include – at the very least – a continuation of a pay cut. Last week, Roberts presented a 2012-13 budget that calls for the 10% pay cut to all employees to continue into next year.

DPS has a $72 million budget deficit and about $500 million in long-term debt obligations.

While Roberts may have imposed a contract, the district has yet to determine staffing. All employees in DPS were laid off pending restructuring and recalls. DPS will need about 3,300 of its 4,100 teachers next fall due to 15 building closures and the transfer of 15 schools to the state reform district.

DPS undertook an unprecedented and chaotic rehiring process this spring that meant all teachers had to interview to be placed into a position for the fall.

Teachers could know by the end of July whether or not they have a job, Johnson said.

via Roy Roberts issues order to impose new Detroit teachers’ contract | City of Detroit | Detroit Free Press |

Legislature Must Go All-the-Way with Pension Reform :: Fox&Hounds

The safest bet in Sacramento is that legislative Democrats will pass a package of modest pension changes this week that they will sell as “reform” in an attempt to convince voters to approve a $50 billion tax hike in November.

The problem is that the Governor’s relatively low threshold for reform is much further than the unions will ever allow the legislature to go. But anything short of what Brown has called the “minimum” cannot be characterized as the real reform Brown has demanded.

It is also worth noting that Democrats likely will pass the pension changes legislatively, not constitutionally as the Governor proposed, allowing lawmakers to reverse any changes they make after November’s tax vote. This notion won’t sound far-fetched to anyone who has watched Democrats exercise their absolute power over the past couple of weeks.

Over eight months ago the Governor unveiled his plan, which he said was the “minimum that any plan in California ought to meet.” At the time his Finance Director said the plan would save between $4 billion and $11 billion of what former Democratic Assemblyman and Stanford professor Joe Nation says could be a $500 billion pension debt. That means Brown’s plan solves about 2% of the problem.

In December, Brown testified before a legislative committee and characterized the current system as a “Ponzi scheme.” In his January State of the State address he urged lawmakers to “Examine (his plan), improve it, but please, do something real.”

Democrats controlling the pension reform process very well could be doing “something real,” but the public likely won’t know until after it passes. Although a complete lack of transparency has driven most of their actions in this and most other issues lately, shielding a pension plan from the press and public could cross over a legal barrier.

Government Code Section 7507 requires the legislature to have an actuarial analysis of proposed pension changes before voting on a measure in policy and fiscal committees. Since the plan is being developed in complete secrecy, no analysis has been made public, if it even exists.

Aside from the potential illegality of the Democrats’ secret plan, it’s really bad policy, and is exactly how we ended up in this mess to begin with. In 1999 lawmakers jammed through pension changes that have increased the state’s CalPERS payments from $159 million before the changes to $3.7 billion today.

It still stands as the largest non-voter approved debt issuance in the state’s history, a debt that has now reached $500 billion and taxpayers are on the hook.

Democrats will jam through marginal pension changes this week. The Governor will probably give them cover and sign off on them. But voters, ever more educated about and disgusted by our pension crisis, won’t be fooled.

via Legislature Must Go All-the-Way with Pension Reform :: Fox&Hounds.

Pension debts in Illinois and Chicago would soar under new Moody’s ratings plan – Government News – Crain’s Chicago Business

(Crain’s) — In a proposal that could heighten the stakes for pension reform in both Illinois and Chicago, a leading credit rating agency plans to recalculate public pension liabilities with much more conservative financial assumptions than most states or cities have been using.

The new methodology could triple the nation’s public pension debt, at least by this one measure, and nearly quadruple how much state and local governments should contribute to cover their obligations at a time when many governments already are struggling to meet annual pension payments, according to Moody’s Investors Service Inc.

The agency noted that it already has downgraded the credit ratings on Illinois and Chicago as pension liabilities escalated in recent years.

While the new assumptions are meant to provide a more accurate comparison of pension funding burdens, they are not meant to be a new standard for setting contribution levels.

“We propose these adjustments for the purpose of providing greater clarity and comparability to investors, and to assess the scale of pension liabilities in a way comparable to debt obligations,” the New York-based credit reporting agency said in a report. “We are not suggesting that they be a guide, standard or requirement for a state or local governments to fund these obligations.”

Moody’s issued a request for comments Monday on its proposal to use several new uniform criteria for evaluating how pension liabilities compare among states and cities.

For instance, Moody’s proposed an investment return assumption of 5.5 percent, based on an index of high-grade corporate bonds, instead of relying on widely varying and usually much higher rates of return assumed by most public plans, which tend to reduce future liabilities. Most public plans assume they will earn 7.5 to 8.25 percent annually on their assets.

Moody’s also wants to calculate assets at market value, eliminating the common practice of “smoothing” investment gains or losses over several years. In addition, the agency wants to apply a uniform discount rate of 5.5 percent on pension liabilities and a 17-year period to pay them off, a much shorter time period than most states employ.

No states are expected to see lower ratings as a result, but the tougher comparison could reveal some cities whose pension debts are high relative to their current ratings, Moody’s said. Chicago’s rating likely wouldn’t change, either, the company indicated.

via Pension debts in Illinois and Chicago would soar under new Moody’s ratings plan – Government News – Crain’s Chicago Business.

Analysis – Stockton, Calif. new paradigm for struggling U.S. cities

New York, July 1 (Reuters) – Stockton, California, the largest city in the United States to ever file for bankruptcy, could create a new template for struggling cities and potentially lift the stigma that scars municipalities if they seek court protection from creditors.

If Stockton, which filed for Chapter 9 municipal bankruptcy on June 28, can reach consensus with its creditors and craft a plan to exit bankruptcy quickly others may follow suit, legal experts said.

“Successful cases breed more filings,” said Andrew Glenn, a bankruptcy partner in New York at Kasowitz Benson Torres & Friedman. “Municipalities watch these cases closely around the country, and once the template is set up, if other towns have these problems, they’re going to follow the template.”

Other cities and counties have gone bankrupt because of a bad investment or ill-conceived public works project, like the sewer system that sank Jefferson County, Alabama, into $3.14 billion of debt.

But Stockton may be a new breed of failing city, swamped by routine costs, pension payments, a payroll for city employees, a years-long economic slide and depressed housing tax receipts – the same issues that currently face many other cities still struggling to recover from the cavernous U.S. recession.

“Stockton is a precursor of something very different” from Jefferson County, Glenn said. “That’s what makes it sort of a game-changing type of a case.”

It will be the first case to test California’s mandated mediation process. State lawmakers changed the rules after the city of Vallejo went bankrupt in 2008 and then slogged through a three-year bankruptcy battle that racked up at least $10 million in attorneys’ fees.

Now, unless they declare a fiscal emergency, California municipalities must participate in mediation before they are allowed to file for bankruptcy.

Each state has different requirements for cities and towns that want to file for Chapter 9 bankruptcy.

Some use budget commissions, receivers and other measures to try to help resuscitate cities before allowing them to go bankrupt as a last resort. Nearly half of U.S. states don’t allow municipal bankruptcies at all.

James Spiotto, a partner at Chapman and Cutler in Chicago, said California is the only state that requires mediation prior to a Chapter 9 filing. A similar proposal failed to pass the Illinois legislature this session, he said.

He also noted in a recent national survey of Chapter 9 state provisions that California labor unions supported the mediation law as “a reaction to the difficulties they experienced in the city of Vallejo Chapter 9 bankruptcy proceeding.”


Though the mediation process didn’t stave off the bankruptcy for Stockton, lawyers said it forced the city and creditors to talk to each other ahead of time and put the city in a better position going into court – and could result in a quicker exit from the case.

“Stockton is incredibly well-prepared for a bankruptcy filing and very forthcoming in terms of disclosing to creditors and the public,” said Karol Denniston, a bankruptcy partner at Schiff Hardin in San Francisco.

A third of Stockton’s creditors reached agreements with the city during mediation, giving the city “a huge leg up, because at least they’re not filing bankruptcy like Vallejo did, fighting with everybody,” she said.

That result will also allow the city to show a bankruptcy judge it has tried in good faith to negotiate with creditors and is truly insolvent – requirements a California city must normally meet for a bankruptcy filing to be ruled valid.

One big step Stockton is not expected to take is to attempt to dodge its pension obligations to city employees.

If it did, the city would have to confront the powerful California Public Employees’ Retirement System (Calpers), which handles pension plans for many California cities and counties.

Calpers and unions around the country have made it clear they see a pension as an iron-clad right, one that’s legally protected even in a bankruptcy.

Whether pensions are contract rights, which can be changed, or property rights, which are protected under the U.S. Constitution, has never been tested in court.

That’s largely because of the time, money and emotional effort it would take for a municipality to fight deep-pocketed and politically connected pension systems to full resolution at an appellate level, experts said.

“Calpers is going to push back hammer and tong,” said Kenneth Klee, a professor at the University of California at Los Angeles Law School.

Public employees pensions weren’t challenged by Vallejo, which used the same attorneys Stockton has hired.  read more…

via Analysis – Stockton, Calif. new paradigm for struggling U.S. cities.

Obama, the U.S. Supreme Court and the ‘T-word’

WASHINGTON, June 28 (Reuters) – President Barack Obama and fellow Democrats took great pains to avoid the word “tax” when they pushed through Congress a sweeping U.S. healthcare overhaul that would require most Americans to buy insurance and would fine them for failing to do so.

Instead they called it a “penalty” and the 2010 law itself used the same term. They wanted to avoid the highly unpopular and politically charged “T-word” that could have sunk the law’s prospects in Congress.

The Obama administration even went so far as to avoid making the power-to-tax argument the main one for advancing the law in March when it argued the case before the nine justices of the Supreme Court.

Instead it highlighted another power in the U.S. Constitution – the federal government’s authority to regulate interstate commerce.

In the end, it was the tax argument that saved the law. Chief Justice John Roberts, a conservative, joined with the four liberals on the Supreme Court to issue a narrow majority ruling upholding the healthcare law.

The law’s “requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax,” Roberts wrote for the court’s 5-4 majority.

“Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness,” he wrote, joined by justices Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sonia Sotomayor.

Sitting directly in front of Roberts as the chief justice announced the opinion on Thursday was U.S. Solicitor General Donald Verrilli, the man who had argued the government’s case for the healthcare law.

Soon it became clear that Verrilli had won the day – with what had been a secondary argument. Roberts accepted the Obama administration’s view that the penalty for not buying insurance is not called a “tax,” but effectively operates that way.

Roberts wrote in the decision that in the end it did not matter whether the law called it a penalty. “That label cannot control whether the payment is a tax for purposes of the Constitution,” he wrote.

The label will certainly factor in the run-up to the Nov. 6 election.

Taxes will be a central campaign theme for Obama’s Republican opponents, and his Republican rival for the job, Mitt Romney, quickly seized on the issue saying: “Obamacare raises taxes on the American people by approximately $500 billion.”

Other Republicans portrayed the president’s selling of the healthcare law as a deception.

“The president of the United States himself promised up and down that this bill was not a tax,” Senate Republican Leader Mitch McConnell said in a Senate speech minutes after the Supreme Court ruled.

“This was one of the Democrats’ top selling points – because they knew it would have never passed if they said it was. The Supreme Court has spoken. This law is a tax,” he said.

via Obama, the U.S. Supreme Court and the ‘T-word’.