CAPE Legislative Alert / December 2013:

New Pension Reform Ballot Initiative Aims for November 2014 Ballot By Tim Yaryan, CAPE Legislative Counsel and Advocate

One of the biggest issues facing CAPE members in the next year may be a proposed ballot measure about public employee pensions which is sponsored by San Jose Mayor Chuck Reed.  You may remember Mayor Reed as the chief proponent of a local San Jose ordinance which drastically reduced pension and healthcare benefits for local public employees.  The impact of the measure was so enormous that, literally, hundreds of San Jose police officers have sought jobs outside San Jose in spite of the fact that San Jose ranks fifth in the state in wages paid to its police officers.  Other public employers are following suit.

Well, guess what?  Mayor Reed has now filed a statewide “pension reform” initiative aimed at EVERYONE ELSE!  Guess what else?  You aren’t going to like it any better than the San Jose police officers and other public employees liked what Reed did in San Jose. 

Here’s what you need to know about the upcoming “Reed Pension Initiative.”  If enacted, it will amend the California Constitution to apply to ALL public employees and all public employee employment retirement systems.  Specifically, the “Reed Pension Initiative” will do the following if it is approved by the voters:

• Repeals vested rights of public employees and allows government employers to cut, change, or eliminate retirement and/or retiree healthcare benefits of current employees on a prospective basis.
• Provides that a collective bargaining agreement executed within 12 months before the effective date of this Act that are inconsistent with the Act shall be deemed invalid.
• Provides for a rebuttable presumption that any labor agreement renewed or extended more than 6 months before its expiration date, during the 12 month period before the effective date of this Act, was entered into for the purpose of violating the Act.  Thus, it will be deemed invalid.
• Provides that any government employer that finds its pension or retiree healthcare plan is substantially underfunded and is at risk of not having sufficient funds to pay benefits to retiree or future retirees, or declares a fiscal emergency because the financial condition impairs the ability to provide essential government services or to protect the vital interests of the community, will have the authority to implement one or more of the following actions:
• Reduce the rate of accrual for pension or retiree healthcare benefits to be earned in the future.
• Reduce the rate of cost of living adjustments for pension or retiree healthcare benefits to be made in the future.
• Increase the retirement age for payment of pension or retiree healthcare benefits to be earned in the future.
• Require employees to pay a larger share of the cost of pension or retiree healthcare benefits.
• Other reductions or modifications of pension or retiree healthcare benefits agreed upon during collective bargaining.

This initiative will apply, not only to new employees who have yet to secure “vested rights” but to ALL public employees.  All future retirement and healthcare benefits are on the table regardless of whether you have “vested rights” or not!  In a nutshell, all your future retirement and healthcare benefits are at risk if the Reed Pension Initiative is approved by the voters, and becomes law!

In California, the initiative process takes roughly 6 months from start to finish.  Reed filed his initiative with the Secretary of State in October, and a revised “cleaned up” version in November.  A very crucial time in the life of the initiative process occurs shortly after an initiative measure has been filed.  Title and Summary are issued after review by the Attorney General, and the Legislative Analyst prepares an analysis of the measure.  In Reed’s case, we expect Title and Summary and the L.A.O. Analysis to be released in early January 2014.  Since what voters often read before casting their votes is the Title and Summary, (and sometimes the analysis), public perception of the measure can be greatly influenced by what is documented at this stage.  Specific polling is often conducted after Title and Summary and the LAO Analysis is released, and the polling results often determine the fate of a ballot measure.  If the polling comes back positive, proponents of an initiative will circulate the positive polling results for donors to help fund a drive to circulate petitions for a signature.  If polling is negative, funding dries up. This is the phase where most initiatives usually die.  In Reed’s case, we know from campaign reports that he already has funding from the “Arnold Foundation” (no, not Arnold Schwarzenegger, but a Texas oil billionaire who was a central figure in the Enron scandal) and some “dark money” from Wall Street/Koch Brothers’ funded PAC’s (think of the $11 million funneled in at the last minutes by proponents of “Paycheck Deception” in 2012.)  We expect Reed’s Initiative will not die for lack of funding.

The next phase of the initiative process is signature gathering. In order to qualify an initiative on the ballot, the proponents must obtain a certain percentage of valid signatures based on the last gubernatorial election.  Typically, but not always, professional signature gatherers are employed to accomplish this phase of the process.  Success here is usually based upon the amount of money offered the signature gatherers to collect a valid signature.  Today, gatherers get paid anywhere from fifty cents up to $4.00 or more per valid signature.  It’s easy to see the motivation and possibility of success here.  In Reed’s case, he has until late June to collect enough signatures to qualify his measure for the November 2014 ballot.  However, that’s the state deadline.  The “real” deadline is mid-April (April 18).  Mid April is the time all signed petitions must be submitted to county election officials to get on the November 2014 Ballot.  We should know shortly after the April deadline whether Reed will qualify his Pension Reform Initiative for the November 2014 General Election Ballot.

If Reed qualifies, we can expect to see an opposition campaign similar to the “Paycheck Deception” campaign of 2012.  Planning is already underway to organize and fund a significant opposition campaign.  It will be a major campaign and opponents, largely public employee unions, will target $40 million (or more) in an effort to defeat this measure.  If Reed fails to qualify for November 2014, he can still submit signatures to qualify for the 2016 General Election.

Bottom Line:  If you are a public employee, your future healthcare and retirement benefits are at substantial risk if the Reed Pension Measure passes.  Almost certainly, you will be faced with significantly higher employee contributions for both healthcare and retirement.  In some cases, you may lose, by reductions or eliminations, future retirement and healthcare benefits. For retired (or soon to be retired) employees, you risk losing annual Cost of Living Adjustments.  The Reed Pension Initiative is a bullet aimed right your pocketbook! Beware!

Until next time, stay safe!