Bipartisan California Pension Reform Initiative Gains Steam

Published September 11, 2015

Former San Diego City Councilman Carl DeMaio and former San Jose Mayor Chuck Reed (D) are collecting signatures to place an initiative, the Voter Empowerment Act of 2016, on the November ballot that aims to reform the state’s 130 taxpayer-funded pension programs.

According to a November 2014 report from California State Controller John Chiang, municipal and state pensions have overpromised benefits to government employees by $198 billion, or about $5,210.53 per resident.

Taxpayer Empowerment

DeMaio says the Voter Empowerment Act, if approved by voters, would solve some problems encountered by past efforts to reform the state’s public pension system.

“The important part of the initiative is the language in Section 23A that removes all the barriers we faced on pension reform,” DeMaio said. “It says that the voters have the final say … on pension matters by using the initiative or referendum process in California. That’s important because, to this point, the courts have said, ‘We don’t know if you can make changes, maybe the people don’t have the right to an initiative when there’s state labor law involved.'”

DeMaio says the Voter Empowerment Act would help put the people paying the bills—the taxpayers—back in charge.

“What we’ve done is cleared the way for voters, the people who pay the bills, to have the ultimate and final say on these matters,” DeMaio said. “Voters will be the check and balance on giveaways by politicians, which we know will yield more reasonable benefit packages for public employees.”

‘Not Just a Pension Issue’

Bill Bergman, director of research at Truth in Accounting, says California needs to rein in government spending in general, not just pension spending.

“It’s not just a pension issue,” Bergman said. “It’s important to think more broadly about the financial health of the state. We see their healthcare liability is significantly higher than just the pension. And more importantly, the state’s public debt runs significantly higher, relative to the average state.

“The bigger picture isn’t pretty,” Bergman said. 

‘Direct Correlations’

Bergman says public debt negatively affects states’ economies.

“Across the 50 states, we see direct correlations between debt loads and economic growth, as well as quality of government services,” Bergman said. “We see evidence that, for instance, either directly or through Medicaid services, doctors aren’t … willing to participate in Medicaid programs in states that are financially pressed, so there are many ways in which social services provided to poor people are being hurt by states with significant debt problems.”

Bergman says accurately reporting the size of the pension problem is the first step toward solving it.

“One of the big problems in the accounting of the pension plans is the costs of providing these services have been buried or hidden or [are] hard to find,” Bergman said. “That’s been one of the main sources of the crisis is that citizens didn’t understand how much their government costs.

“It costs a lot more than what they’re being told,” Bergman said.

Jeff Reynolds ([email protected]) writes from Portland, Oregon.

Internet Info:

Truth in Accounting, “2013 Financial State of the States Report”: