Friday, March 18, 2011

LA Times: Both Parties See Advantages in Pension Reform

Republicans, Democrats both see political advantage in California pensions issue

Republicans are waging a cost-cutting campaign in various states and have targeted taxpayer-funded benefits. Democrats, however, are reluctant to give up too much in negotiations over public pensions because of labor's influence in California politics.

March 18, 2011
Copyright © 2011, Los Angeles Times

Reporting from Sacramento -- Government pensions are being scaled back across the nation, but labor unions in California are struggling to fortify the state's position as a bulwark for generous retirement benefits.

Those seeking to dismantle the state's current system say taxpayers, who foot part of the bill, simply can't afford it. But the battle is as much about politics as finances.

Some labor leaders have said they'd sooner see state budget negotiations unravel than give way on pensions for their members. GOP lawmakers, who are leading the charge for a pension overhaul in Sacramento, say they are prepared to let that happen.

They concede, when pressed, that adjusting pensions now won't provide substantial savings to the state for years to come and would do little to ease the current budget crisis. It would, however, dilute the influence of labor in California politics.

The GOP push in California is part of a "national Republican strategy that goes beyond simply fixing the problems as we know them," said Art Pulaski, executive director of the California Labor Federation.

State Republicans, who have demanded a benefits rollback as a condition for supporting Gov. Jerry Brown's budget plan, are emboldened by GOP headway on the issue in Illinois, Colorado and New Jersey, among other states. A nonprofit with ties to GOP strategist Karl Rove, Crossroads Grassroots Policy Strategies, is running ads in California as part of a national campaign promoting the message that Democrats are "shutting down" capitals across the country to protect union wages and pensions.

The legislators also are bolstered by recent findings from a key California watchdog agency that the state pension system is unsustainable. Additionally, Brown, a Democrat whose victory in the gubernatorial campaign last year was largely funded by unions, has signaled a willingness to deal on pensions and a preference for doing so in bipartisan fashion.

"Things have intensified," says Dave Low, chairman of the union group Californians for Health Care and Retirement Security, a coalition of union groups formed to defend retirement benefits for state employees.

In response, labor groups have launched a media blitz, sending advocates to public forums, penning opinion pieces in newspapers and holding conference calls with reporters to make their case. Union leaders sent a letter to lawmakers and Brown this month, urging them to hold the line on pensions.

Low's coalition has hired a public relations consultant, Steve Maviglio, who was a spokesman for former Gov. Gray Davis, to help counter the Republicans' moves. And Low said his group was considering an aggressive advertising campaign.

"We're prepared to do whatever it takes," he said.

Field Poll results released Thursday suggest his group has an uphill fight. The survey found that 73% of California voters support a cap on state pensions, and 69% believe workers should pay more for their own retirement. A majority of those polled also supported moving to a 401(k)-style plan rather than continue a guaranteed-benefit system. All of these ideas have been embraced by Republicans who are negotiating with Brown.

At stake are retirement benefits that far exceed what is available to the average private sector worker. The California Foundation for Fiscal Responsibility, a group pushing for pension changes, has on its website statistics from the state's three largest pension systems that show more than 15,000 government retirees collecting pensions greater than $100,000 annually.

Some employees can retire with guaranteed payouts higher than their best salary, and many public safety professionals can start collecting retirement pay at age 50. Workers who want to raise their retirement income can buy additional years of credit at a price most investment professionals consider a steal.

"What's getting people's attention is the fact that government employees are securing for themselves wage and benefit packages that are completely unsustainable in the private sector," says Crossroads spokesman Jonathan Collegio. "When average citizens learn about that, they want to see the system changed."

He acknowledges labor's extra clout in the California fight. Unlike most other states where labor has lost recent political fights, Democrats in California control every statewide office and have wide majorities in both legislative houses.

But Republicans got a boost recently from the Little Hoover Commission, a state panel charged with finding ways to make government more effective. In an uncharacteristically blunt report, the commission said: "California's pension plans are dangerously underfunded, the result of overly generous benefit promises, wishful thinking and an unwillingness to plan prudently."

The commission advised lawmakers to require state employees to work longer before qualifying for benefits and to cut the size of pensions for those in the government workforce now and for future hires. It also suggested capping the maximum salary used to calculate pension benefits at $90,000.

Labor leaders lambasted the report as alarmist. They say it should be sufficient to require new hires to make higher contributions to the retirement system and to eliminate spiking — increasing a worker's salary just before retirement to lift his or her pension payouts. And they have said they are willing to suspend benefit payments to retirees who later go back on the state payroll.

Pulaski concedes that the system probably should be changed so that government employees can no longer collect pensions bigger than their highest salaries. But "that is the cutoff point for me," he said.

Brown has endorsed many of these ideas. But to Republicans, they amount to inadequate tinkering.

Labor wants "the easy fixes that resonate really well," said state Sen. Bill Emmerson (R-Hemet), one of five GOP senators who has been negotiating a potential budget compromise with Brown. "But we need to make the tough changes."

Pulaski notes that unions have made concessions. He points to labor deals struck with Gov. Arnold Schwarzenegger last year that cut pay and increased the amount employees pay toward their retirements.

He says that if Brown bends too far to Republican demands, that could jeopardize labor's support for the special election the governor wants this year to get voters' blessing for billions of dollars in taxes to help balance the budget. Brown would need labor's deep pockets to finance a campaign.

"If there were serious cutbacks to pensions," Pulaski said, "we would oppose it."

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