Since voters in San Diego and San Jose overwhelmingly supported ballot measures scaling back worker retirement benefits in June, California Governor Jerry Brown has again picked up the cause of pension reform. Alas, Democrats in the legislature aren't listening, so it looks like voters will have to use the ballot box to get the job done.
Surveys show that pension reform and funding education are among the top taxpayer priorities, but the two are not mutually exclusive. Retirement benefits, which are costing taxpayers more than $6 billion a year, have forced significant cuts to higher education and will soon wallop K-12 schools too. According to a California State Teachers' Retirement System actuarial report, the fund's annual pension bill could increase by up to $10 billion over the next 30 years.
Last year the Governor proposed some modest reforms such as shifting new workers to hybrid plans, which include a reduced annuity and defined-contribution component. His plan doesn't go as far as San Diego's ballot measure, which transfers new workers to 401(k)-style plans. Nor is it as aggressive as the initiative championed by San Jose's Democratic mayor Chuck Reed, which modifies benefits for current workers.
Even so, his reforms are too bold for the wholly owned union subsidiaries in the legislature. Democrats refused to take up Mr. Brown's plan, so Republicans introduced it as legislation. Democrats shelved the plan, though they did consider separate Republican legislation to strip pensions from teachers who hook up with their students. They eventually tabled that bill too.
Mr. Brown hopes that the San Diego and San Jose results will finally motivate Democrats who want voters to approve income and sales tax hikes on November's ballot. He's warned that voters will be less inclined to raise taxes if lawmakers don't show they're serious about reform.
Democrats, however, figure that they can placate voters merely by addressing the headline-making pension abuses. You know, the highway patrol deputy who retired with a six-figure disability pension to work as a scuba instructor in Hawaii. A true story.
Such cases may fuel public outrage, but the real problem is that the overarching benefit structure is too generous. If the legislature won't restructure benefits, voters may have to go the ballot initiative route, which will by no means be easy. Several pension initiatives died earlier this year in large part because their sponsors couldn't raise enough money. It takes tens of millions to gather signatures and mount an effective campaign.
Unions on the other hand don't have to raise a penny for their political crusades since they can automatically deduct money from workers in the form of unions dues. According to a California Fair Political Practices Commission report, union political spending between 2000 and 2009 topped $400 million. A lot of that money went toward blocking ballot measures like teacher tenure reform and vouchers.
The biggest threat the unions face this November is a ballot initiative that would restrict their ability to deduct money from workers' paychecks to spend on politics. The initiative, which has already made the ballot, is backed by former Secretary of State George Shultz and Stanford physicist Charles Munger Jr. (who also bankrolled a redistricting initiative in 2010). It's also been endorsed by former state Senate majority leader Gloria Romero—a Democrat.
Union members could still voluntarily contribute to union PACs, but the unions couldn't garnish wages to fill their war chests. Were the initiative to pass, unions would have much more difficulty thwarting pension and other reforms at the ballot box.
Labor groups spent nearly $90 million to defeat similar initiatives in 1998 and 2005, which they claimed were aimed at silencing the unions. Both ballot measures lost by about seven points. However, the unions may have a tougher time killing this year's initiative. Public opinion has turned against government unions in large part because taxpayers are being asked to sacrifice more and more to preserve generous public retirement benefits.
If California voters hope to stand a chance of reining in such benefits and fixing their dysfunctional state, they'll have to break the government union political monopoly this November.