California's legislative Democrats and Democratic governor have announced a pension-reform package that doesn't go particularly far, but goes far enough to annoy some public sector unions. California Professional Firefighters President Lou Paulson said in a statement today, "The pension proposals outlined today represent a retreat from collective bargaining and basic principles of retirement security." He portrayed the state's unionized firefighters -- who earn total compensation packages that average in the $170,000 range, and who can retire with more than 90 percent of their final year's pay at age 50 -- as "everyday working people." Other unions are complaining also. It's absurd that unions continue to insist that reform can take place at the bargaining table. That's where they have the most power and where reform rarely happens. Democrats have suddenly embraced pension reform because polls show that without such reform, voters are unlikely to approve the tax-increase initiative they back in November, so the proposal are more about cynicism than reform.
As the Sacramento Bee's Jon Ortiz reports, "The deal struck by Brown and Democrats in the Legislature would hit most current employees with higher pension contributions by mandating that they pay half the normal cost of their retirement benefits." Virtually all of the reforms, however, apply to new hires. All new hires will pay higher contribution rates. They would -- if the measures pass and are not quietly gutted -- average pensions based on three years of work rather than the last or highest year of work. They would cap pensions at $132,000 for those not covered by Social Security, but would not adopt the hybrid (defined benefit/defined contribution) plan preferred by Gov. Jerry Brown. California employees would still receive pensions that are shockingly generous and unaffordable.
As the Huffington Post reported today, "With election politics in play, Gov. Jerry Brown on Tuesday announced systemic reforms to save billions of dollars in California's underfunded pension systems, but dropped key changes he had sought to avoid a showdown with labor allies. As a result, pension reform advocates said the Democratic proposal fails to address the long-term costs of the state's pension liabilities, largely by leaving benefits for the state's more than 200,000 employees unchanged without contract changes negotiated with unions."
It's clear the reform would do little to touch current unfunded pension liabilities, estimated in California at as much as a half-trillion dollars, but will bring in reforms in decades after new hires start retiring.
Still, it's enjoyable to hear the unions squeal with upset -- something we rarely get to see here in California. And it's telling that even California's union-dominated Legislature and governor feel the need to at least pretend to reform pensions. Maybe some day they will actually reform them.
As the Huffington Post reported today, "With election politics in play, Gov. Jerry Brown on Tuesday announced systemic reforms to save billions of dollars in California's underfunded pension systems, but dropped key changes he had sought to avoid a showdown with labor allies. As a result, pension reform advocates said the Democratic proposal fails to address the long-term costs of the state's pension liabilities, largely by leaving benefits for the state's more than 200,000 employees unchanged without contract changes negotiated with unions."
It's clear the reform would do little to touch current unfunded pension liabilities, estimated in California at as much as a half-trillion dollars, but will bring in reforms in decades after new hires start retiring.
Still, it's enjoyable to hear the unions squeal with upset -- something we rarely get to see here in California. And it's telling that even California's union-dominated Legislature and governor feel the need to at least pretend to reform pensions. Maybe some day they will actually reform them.
The legislative changes are but one more financial joke on the Taxpayers .... and in the back rooms of the Public Sector Union halls they are celebrating another victory.
Not one Plan change changes the fact that the Taxpayer paid-for share of Public Sector pensions will REMAIN 2, 4 (even 6 times for safety workers) greater than the pensions of comparable Private Sector workers retiring with the SAME pay, after the SAME years of service and at the SAME age.
And with all but 10-20% of total Plan costs NOT paid for by the workers, buy by Taxpayer contributions and the investment earnings thereon.
It is WAY WAY WAY past time for a 50+% reduction in the pension accrual rate for FUTURE service for CURRENT (yes CURRENT) Public Sector workers.
Earning no less in "cash pay" (per the US Gov't BLS) what make them so "special" (on OUR DiIme) that they ALSO should get greater pensions and better benefits ?????
SEE THE GREENFIELD PAPER FOR A REFUTATION OF MONAHAN'S POSITION.
THE PUBLIC PENSION COLA COMMITMENT IS AN ESSENTIAL ELEMENT OF THE ECONOMIC ARRANGEMENT BETWEEN THE PARTIES. PUBLIC EMPLOYEES, AT A MINIMUM, HAVE “IMPLIED-IN-FACT” PENSION CONTRACTS. IF COURTS HAVE MISTAKEN LEGISLATIVE INTENT, LEGISLATURES WOULD HAVE CORRECTED THESE MISTAKES OVER THE LAST FIFTY YEARS.
COURT: PUBLIC SECTOR WORKERS ARE NOT “SOPHISTICATED POLITICIANS” WHO EXPECT THEIR GOVERNMENT TO LIE TO THEM.
On August 8, 2012 the National Conference of State Legislatures hosted a panel discussion relating to the contractual nature of public pension obligations. The panel included Professor Amy Monahan of the University of Minnesota School of Law . . . an advocate of allowing governmental entities to change the rate at which public employees accrue pension benefits. The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”
The panel also included Douglas Greenfield, an attorney with a Washington D.C. law firm who refutes Monahan’s legal analysis. As part of his presentation, Douglas Greenfield presented a paper outlining his arguments and analysis . . . “In Defense of State Judicial Decisions Protecting Public Employees’Pensions.”
A PDF of Douglas Greenfield’s paper is available here:
http://www.ncsl.org/documents/fiscal/DGreenfield_Presentation.pdf
A video of the NCSL panel discussion, “How Much Can States Change Existing Retirement Policy?” is available here:
http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx
In his paper, Douglas Greenfield makes a number of observations relating to contractual public pension obligations. A few interesting excerpts are provided below:
Express legislative intent to create a contractual pension obligation is unnecessary:
“There is no reason, and Professor Monahan offers none, why state courts may find state legislation has created enforceable contract rights only by identifying an express ‘legislative intent’ in the statutory language, particularly when these courts are considering the nature of their states’ employment contracts with public employees. As explained below, the state courts’ long-standing precedents protecting public employees’ pension contract rights against unilateral reductions are valid exercises of state judicial authority. Where recognized as contractual, public employees’ pension rights are protected generally under state constitutions (in a number of states) and under federal constitutional law, specifically the Contract Clause, against unilateral reduction or elimination by state government.”
Even where a legislature has enacted an ambiguous statute, an implied-in-fact contract exists:
“Even if a court were to re-examine the public pension programs within its jurisdiction and to conclude that the legislature that first created those laws did not ‘clearly and unmistakably’
manifest its express intent to enter into a binding contract for itself and future legislatures – a result that even Professor Monahan would not favor on policy grounds – the court would nonetheless have more than adequate basis on which to decide that those pension laws created enforceable contract rights, based on surrounding circumstances as well as the court’s inherent power to find the existence of an ‘implied-in-fact’ contract.”
Governments attempting to rid themselves of their own contractual pension obligations (e.g. Colorado PERA employers) will receive greater court scrutiny:
“Under this test, once a contract is found is exist, the balancing factors are interrelated; the more substantial and severe the impairment, the greater the government’s burden to justify the impairment. Also, government actions taken to relieve the government of its own contractual obligations are viewed more stringently than governmental actions that affect only private contracts.”
“Thus, the balancing test is applied with more bite when government seeks to alter a contract to which the government itself is a party, as courts reason that self-interest is more likely to be the motivation than public policy when the government is acting to eliminate or reduce its own financial obligations, rather than those of third parties.”
A real or conveniently perceived “fiscal crisis” provides no justification for breach of pension contracts:
“Courts applying this type of balancing analysis to amendments that alter public employees’ existing contractually protected pension benefits have almost unanimously treated these efforts as imposing ‘substantial” impairments’, and courts also have typically found governments’ justifications based on even real fiscal crises or emergencies insufficient. Most states therefore cannot readily reduce their existing pension obligations to their employees in an effort to solve a fiscal crisis, and until recently few even tried.”
Governments have created long-standing expectations on the part of their public employees and retirees . . . these employees and retirees have acted based on those expectations in the employment exchange transaction:
“In point of fact, the state courts typically have determined whether enforceable contract rights have been created with respect to state pension statutes or codes by evaluating the surrounding circumstances, including the express legislative language, the reasonable expectations of the parties, and the actions both have taken in performance of the contract, as well as the express
statutory language.”
In his paper, Douglas Greenfield cites the case Booth v. Sims, a case in which courts rejected legislative attempts to reduce state troopers’ pensions:
“Unfortunately, the state troopers, secretaries, school service personnel, teachers, highway workers, maintenance employees, assistant prosecuting attorneys and other ordinary state and local workers are not sophisticated politicians who expect their government to lie to them. When, therefore, today’s legislature and today’s governor make those workers promises, those workers believe the promises and organize their lives in the expectation that their government and their employer will treat them honorably.”
The commitment to use a COLA benefit as a means of paying a portion of the fixed (defined) pension debt is an essential element of the economic arrangement between the parties:
“Commitments as to retirement age, accrual rates, cost of living adjustments, employee and employer contribution requirements, and vesting periods are all essential elements of the economic arrangement between the parties and also may be essential to the success of the pension program.”
If courts have historically mistaken legislative intent, legislatures would have corrected these courts over the last fifty years:
“If the courts had initially mistaken the legislative intent underlying these pension programs, and governments had not intended that they create binding contractual rights, governmental entities surely would instead have taken concrete steps, all these many decades, to correct the courts’ errors and to establish that they intended to have the freedom to revise such arrangements at will, as well as to ensure that newly hired employees understood the precariousness of the current pension arrangements.”
“The wide-spread, long-standing acceptance by both legislative and executive branches of state government of their courts’ determinations regarding the contractual intent underlying the state pension programs provides equally strong support for the correctness of these state courts’
recognition of the contractual nature of the pension programs.”
‘There is no sound public policy reason to conclude that these promises – based on the reasonable expectations of the contracting parties – should not be fully protected by the laws prohibiting or limiting the impairment of contracts.”
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Quoting ..."He portrayed the state's unionized firefighters -- who earn total compensation packages that average in the $170,000 range, and who can retire with more than 90 percent of their final year's pay at age 50 -- as "everyday working people.""
Excuse me, but everyday working PIGS would be quite a bite more appropriate at $170K/yr.
You really didn't think that Gov. Moonbeam and his Double Dealing
Democratic Cohorts would Stab their Union Bosses in the Back, Did Ya ???
Only one way out of this !!! Declare Martial Law and Nationalize the
National Guard and Arrest All the Democrats and Union Bosses on RICO
Conspiracy Charges !!!