SACRAMENTO -- Labor's steep losses at the polls Tuesday gave new hope to pension reformers throughout California and perhaps new impetus to Gov. Jerry Brown and Democratic leaders to strike a deal on lowering the cost of public-employee pensions.
In San Jose, once a labor-friendly paradise, voters overwhelmingly backed a measure touted by Mayor Chuck Reed, who argued that the city can no longer afford generous pension plans as cops and city services get the ax. The vote came on the day San Diego approved a similar measure and Wisconsin voters rejected the recall of the stridently anti-labor Gov. Scott Walker.
"The pension reform votes in San Jose and San Diego are a powerful wake-up call," Brown told this newspaper in a statement. "I have a 12-point pension reform plan and, after I lock this budget down, people should feel confident that pension reform is next on the agenda."
Brown's incentive is clear: He needs to show he's asking state workers to sacrifice so that voters will be more amenable to his tax-hike initiative on November's ballot. The measure would raise income taxes on couples making more than $500,000 and boost the sales tax by a quarter of a cent.
"Yesterday was certainly a move toward pension reform because it's clear to everyone that we need it now," agreed Dan Pellissier, president of California Pension Reform, a group that tried unsuccessfully this year to qualify a statewide pension reform measure.
Rob Stutzman, a Republican strategist, characterized Brown's dilemma this way: "There is a deep-seated anti-tax sentiment in California, so the narrative has to be perfect and it has to involve reforms, including pension reforms."
Almost as deep is the anger many Californians feel over losing benefits, pay and -- in some cases -- their jobs, while public employees have maintained great benefits, said Darry Sragow, a Democratic strategist.
"There is an incredible amount of resentment toward public employees who say they should be immune from all the corrections most Americans are making to get through these economic times," Sragow said.
"So it presumably will be a lot easier to get the governor's tax plan passed if public employees are sending a message they understand the world and are willing to accommodate on pensions. But if public employees refuse to accept changes, that will create a problem for the tax plan."
When California Pension Reform failed earlier to place a pension reform proposal on the ballot, some pressure was taken off the Legislature to quickly produce pension rollbacks.
Still, Senate President Pro Tem Darrell Steinberg has said that some reductions in public employees' benefits will be needed to bolster Brown's case for tax increases to stabilize the state's budget situation. And Steinberg said Wednesday that the elections didn't "change a thing for me. My opinion is the same: We know we need to get pension reform done before the end of the legislative session and we will get it done."
Brown's 12-point reform plan has been in the Legislature's hands since early February, but parts of it -- asking employees to contribute more of their salaries to pensions and partially switching to a 401(k)-style benefit for new employees -- has met with resistance from Democrats and labor groups.
He is likely to win a package that includes ending the practices of "spiking" -- bolstering benefits with huge late-career salary hikes -- and "double-dipping," or allowing retired workers to continue to earn a state salary while collecting their pensions.
Dave Low, chairman of a labor group focusing on pension issues, said he doubts that the election victories in San Jose and San Diego will amount to any momentum across the state. He noted that few cities have expressed plans to take up pension reforms any time soon, possibly because labor groups have negotiated new collective bargaining agreements with 350 local agencies and municipalities over the past three years.
"I would think there's no huge statewide implications from these two elections," Low said. "It's more of a case-by-case basis. These elections say something about voters in two cities, where there was a huge onslaught of negative press, and where they were having to make terrible cuts all over the place because the budgets and pensions were so badly managed."
But Pellissier disagreed, contending that Tuesday's votes will reassure those who might contribute toward other pension-reform measures that voters will approve them despite heavy opposition from labor unions.
"It gives confidence to people in the political and donor world that this issue a winner," Pellissier said.
As expected, the San Jose measure immediately met with legal challenges from city unions. So, Pellissier acknowledged, many city officials elsewhere are likely to wait to see how well the measures fare in court before considering a similar ballot-box solution.
But he added that even with the legal questions unsettled, the strong voter approval in San Jose and San Diego will give cities added leverage in seeking more substantial pension cutbacks from employee unions.
It could factor in to "how far they can push their unions in reaching agreements" as part of any pending municipal bankruptcy, in addition to making unions more open to concessions, he said.
Public employees are willing to negotiate rollbacks to their benefits, said Steve Smith, a spokesman for the California Labor Federation.
"Public employees have gone to the table and recognized there will be cutbacks," Smith said. "But let's make sensitive decisions that help the state over a long time, not punitive decisions that react to the polls or to one election."
Here's Gov. Jerry Brown's plan for reforming public employee pensions.
Source: Governor's office