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2013 Local Pension Measure Roundup

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December 27, 2013

By Josh Altic

This year there have been 10 pension reform related measures proposed for 2013 ballots and only 7 actually voted on, with 5 approved and 2 defeated. One initiative petition to further reform the Phoenix pension system is being circulated for 2014. This report also discusses the 2013 events that have set the stage for pension reform in 2014.


Voters in the third largest city in Ohio overwhelmingly rejected a pension reform initiative that would have dynamically changed the public pension system for any new public employee hires. The measure sought to change the Cincinnati's public pension plan for new hires from a defined benefit plan to a defined contribution plan. Several other rules would also have been established by the amendment, such as a cap on city contributions, restrictions on cost of living adjustments and a stipulation that no city employee can simultaneously earn income from a city job and receive retirement benefits. The Cincinnati for Pension Reform committee collected the requisite signatures to get Issue 4 on the city ballot but, according to campaign manager Chris Littleton, did not have enough funds left after petition circulation and legal battles to successfully advertise to the city voters.[1]


Phoenix and Tucson were the hotspots for pension reform ballot measures in Arizona this year. A reform plan was approved by the Phoenix voters on the March ballot in the form of Propositions 201 and 202. This reform increased employee contributions to the pension fund and increased the retirement eligibility age. It also created regulations for the investment of the pension fund. Some critics of Props 201 and 202, including Councilman Sal DiCiccio, did not believe they would be a sufficient solution to the pension debt of the city. The Pew Charitable Trust did a study in 2009 that estimated the Phoenix public employee retirement system had $5.115 billion in pension liabilities and that $1.399 billion of these debts were not backed by city assets, making the retirement fund only 73% funded.[2] DiCiccio reports that the unfunded liabilities have nearly doubled since 2009 and now stand at $2.4 billion in pension debt not covered by the cities pension fund. He is supporting a proposed 2014 ballot measure initiative that would more drastically reform the city's pension system and prohibit the practice of pension spiking.[3][4]

Measure Status Goal of measure
Cincinnati Issue 4
Change pension plan from defined benefit to defined contribution
Phoenix Prop. 201
Increase employee contributions and retirement age
Phoenix Prop. 202
Regulate investment of pension fund
Tucson Prop. 201
Proposed ballot measures that were not on a ballot
Change pension plan from defined benefit to defined contribution
LA Measure B
Allow the purchase of retirement credit by transferred sworn police personnel
LA Pension Initiative
Proposed ballot measures that were not on a ballot
Change pension plan from defined benefit to defined contribution
Pacific Grove Initiative
Proposed ballot measures that were not on a ballot
Rollback pension benefits for existing employees and retirees
San Francisco Prop. A
Regulate withdrawals from retiree health care fund
Hialeah Pension Measure
Eliminate pension plan for elected officials; requires voter approval of future changes
Addison TWP Measure
Shift the responsibility for local school districts pension costs from the State to the Township

An initiative to reform the public employee pension plan in Tucson was also circulated and was successful in collecting enough signatures to qualify Prop 201, also known as the "Sustainable Retirement Benefits Act", for the November 5, 2013 ballot. The measure, however, was removed from the ballot through a lawsuit over signature validity technicalities and petition circulator qualifications. If it had reached the ballot and had been approved, Prop 201 would have changed the Tucson public employee pension plan from a defined benefit plan to a defined contribution plan.[5] There is a possibility that this measure of a similar measure will appear on a 2014 ballot in the city of Tucson.


In California, four measures relating to pensions and retirement benefits were proposed, but two of them - the two that proposed the strictest reform - did not reach the ballot. The first of these was a measure proposed in Los Angeles by former mayor Richard Riordan to alleviate the pressure put on the city by ballooning city pension payments. According to Riordan, the city's annual pension obligations are likely to balloon to $3 billion by 2017. This would amount to 50% of the city's annual budget. In 2001, the annual pension payout was $220 million. In 2012, it was $1.2 billion. The measure would have moved new hires from a defined benefit plan to a defined contribution plan, eliminated pension spiking, prevented automatic pension increases during years of investment under-performance and established other provisions designed to cut down on the city's pension costs. The supporters of this measure, however, were not able to collect enough signatures to qualify it for the ballot.[6]

The other measure that did not make the ballot was a successful initiative to roll back pension benefits in the city of Pacific Grove. Although enough valid signatures were collected, the city council requested declaratory relief from the courts to ascertain whether the measure was legal before allowing voters to have their say on the issue.[7]

The other two measures featured in California were successfully put on the ballot and were approved. One was approved in the city of Los Angeles in March and simply allowed "sworn police personnel who are transferred from the Department of General Services to the Police Department to purchase, at their own expense, retirement credit for prior sworn City service after they become members of the Fire and Police Pension Plan." The other affected the retiree health care fund, rather than the pension fund, in the city of San Francisco. It was approved in the November 5, 2013 election and amended the city charter to "allow payments from the Retiree Healthcare Trust Fund only when the Trust Fund is fully funded or only under specified circumstances."


Voters in the city of Hialeah, which has population of 231,941, making it the 88th largest city in the nation and the 6th largest city in Florida, voted 80% to 20% to eliminate the generous pension benefits previously offered to elected city officials and require voter approval for any future changes to the public official pension plan.


In the township of Addison, Illinois, a school pension question was defeated by voters. The question asked, "Shall the Illinois General Assembly shift the responsibility for local school districts pension costs from the State of Illinois to the property taxpayers of Addison Township?"

Setting the stage for 2014

Although voters have not seen pension reform on the ballot in an especially large number of cities this year, certain bankruptcies, studies, court decisions, state-wide pension reform and proposed ballot measures have prepared the landscape for what looks to be a heated battle between pension reform advocates and unions in 2014. Primarily, 2013 events have served to put pension troubles in the highlight of public consciousness and political and economic dialogue.

High on the list of events that will provide an arena-shaping precedent in 2014 is the saga of Detroit's financial woes. In one of the largest municipal bankruptcies in history, the Motor City filed for chapter nine protection after realizing its books were $18.5 billion in the red, over $5 billion of which was owed to retired employee pensions. Unions immediately sued, arguing that the bankruptcy could not apply to public retirees who were depending on their pensions. Recently, federal bankruptcy judge Steven W. Rhodes ruled in favor of Detroit and, somewhat unexpectedly, ruled that the city was, in fact, able to alleviate its pension debt through filing for bankruptcy.[8] This decision will likely affect pension struggles across the nation, as cities are now operating with extra bargaining chips: public pension debt is not protected against chapter 9 bankruptcy.

Another court decision, this time in favor of the unions, was issued by Judge Patricia Lucas of the Santa Clara County Superior Court. This decision ruled that the main provisions of San Jose Measure B that decreased pension benefits were a violation of the "vested rights" of current employees and could not be implemented. Judge Lucas did, however, leave certain wage and health benefit reductions from Measure B intact. Lucas upheld a previous precedent in California that protects the pension benefit plans of current employees as "vested rights" and, therefore, untouchable according to the California Constitution.[9] A measure intended to overturn this precedent and define "vested rights" to allow changes in city employee pension plans has been proposed for the state ballot in California for 2014.

List of 2013 local pension measures