Pension Hotspots:Porterville City, CA, and Orange County, CA
By Josh Altic
- The Pension Hotspots Report is a monthly publication about local pension reform efforts.
As of May 31, 2014, seven pension related measures have been proposed. One of these has been approved, one was defeated, and the remaining five are pending.
Two pension related measures will be decided by local California voters on June 3, 2014. Although one is largely symbolic, and the other is technical and preparatory, they demonstrate a pension related mindset and an awareness of the issue that could foreshadow significant public pension changes for Orange County and the city of Porterville.
Porterville officials are hoping to put the city charter in compliance with state law on pensions, while simultaneously preparing to maintain autonomy if any changes to state law are brought about. Their proposal is called Measure Y and will be decided by voters on the June 3, 2014 election ballot.
If approved, Measure Y reaffirms that city employee retirement, pension and disability/death benefits cannot be terminated except as permitted by the California Constitution and other applicable state laws. It would also formally clarify that the city of Porterville has full power over the creation, modification and elimination of its pension and retiree benefits. This charter amendment would not allow for any changes in the city's pension system unless state laws regarding local public pensions change. Measure Y was designed to put the city's charter in compliance with state law, while preparing the charter for possible alterations to California code.
Measure Y was put on the ballot as part of comprehensive charter reform recommended by the city's charter review committee.
Orange County, California
County employees, including elected and appointed officials, are required by law to contribute towards their pensions. Currently, the county is allowed to pay these required contributions on behalf of the employee as part of an employment benefit. If approved, Measure A would prohibit the county from paying these employee contributions for any members of the Board of Supervisors or any other elected officials in the county who start their term of office after the Measure A election on June 3, 2014.
- The Orange County Register editorial board wrote an article endorsing Measure A. The editorial, in fact, called for even stronger reform to entirely eliminate pensions for elected officials. An excerpt of the editorial is below:
While largely a symbolic gesture, since the actual cost savings for a handful of elected officials will be minor, this strikes these editorial pages as a common-sense and fair reform, especially given the fact that the county has been asking its employees to likewise cover their own pension contributions. As Supervisor Todd Spitzer told us, “If we’re going to ask our rank-and- file employees to pay their fair share, we should, too.”
One question remains in our minds, however: Why do elected officials earn pensions in the first place? Pensions were intended to provide stability and encourage long tenures, while elections (and term limits, in the case of the supervisors) are supposed to allow for change. We hope the Board of Supervisors will take the next step and do away with pensions for elected officials altogether.
Vote Yes on Measure A. 
—Orange County Register editorial board
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Fate of city pension debt after Stockton bankruptcy to be decided by courts:
U.S. Bankruptcy Court Judge Christopher Klein will be faced with the decision to either allow Stockton's 2010 bankruptcy to apply to pension debt, requiring other city creditors to absorb the additional cost of defaulted loans, or require the city to repay pension debt despite its financial collapse. The California Public Employees' Retirement System (CalPERS) contends that money owed it by the city is protected by California law. So far, Stockton has not tried to renege on any of the $285.2 billion pension debt owed to CalPERS, but this may change based on Judge Klein's ultimate decision. Klein said, "We have a festering sore here. We got to get in there and excise it and figure out what the story is. Maybe Calpers is correct, maybe not."
Klein will be under statewide scrutiny as he works toward a ruling that could have widespread consequences for public pension systems across California. Many cities face or have already filed chapter nine petitions, and the financial situation of these cities will be drastically different depending on whether bankruptcy is allowed to apply to pension debt, which is significant in nearly every city in the state.
Pension reform in Cook County, Illinois, falls short of approval:
Although Cook County Board President Toni Preckwinkle, faced with opposition from the GOP and from some critical public-sector unions, was unable to push her pension reform plan through the Illinois House, she remained dedicated to reforming the county's pension system and fighting for her measure again in future legislative sessions. Preckwinkle proposed raising employee retirement ages and pension contributions and trimming down retirement benefits in an effort to reduce the county's $6.5 billion in unfunded pension liabilities. The GOP, however, disapproved of the compounding cost of living adjustment that would, according to Preckwinkle's proposal, remain in the county's plan, despite its elimination from state and city retiree plans.
In response to the failure of her bill, Preckwinkle stated, "Pension reform is critical to protect the retirement security of our workers, the county's bond ratings and the interests of taxpayers in eliminating $6.5 billioin [sic] in unfunded pension debt. I look forward to continuing to work with members of the General Assembly to adopt this sound plan of reforms later this year."
Measure B pension reform in San Jose delayed by judge's ruling:
A set of San Jose pension reforms, approved by voters in 2010, stumbled into its latest roadblock when Santa Clara County Superior Court Judge Patricia Lucas signed an agreement between unions and the city that puts off the employee pension contribution increases proposed by Measure B, as well as pay cuts for city employees, until July 1, 2015, at the earliest. The pension contribution increases were initially ruled out by Judge Lucas in her December decision on Measure B. Her decision did allow the city to cut employee pay in order to keep the pension system funded. As court proceedings over the legality of Measure B reforms continue, the May compromise was designed to put off both pay cuts and contribution increases in order to give the courts further time to decide on the legality of the questionable provisions found in the 2010 measure.
List of 2014 local pension measures
- Ventura County Sustainable Retirement System Pension Reform Initiative (November 2014)
- City of Phoenix Pension Reform Initiative (2014)
- Pacific Grove City Initiative To Void Ordinance 02-18 Pension Increase (November 2014)
- Orange County Board of Supervisors Pension Contributions, Measure A (June 2014)
- City of Porterville Authority over City Employee Benefits Amendment, Measure Y (June 2014)
- Morningstar report, "The State of City Pension Plans 2013 (excerpt)", November 12, 2013
- Morningstar report, "The State of City Pension Plans 2013", November 12, 2013
- Morningstar report analyzing public pension debt on a state level, September 16, 2013
- Pew Charitable Trust, "Cities Squeezed by Pension and Retiree Health Care Shortfalls," March, 2013
- Moody's website
- Standard and Poor's credit ratings website
- Governmental Accounting Standards Board website
- Pension Tsunami website
- Pew Charitable Trust, "A Widening Gap in Cities Shortfalls in Funding for Pensions and Retiree Health Care," January 16, 2013
- Tulare County Elections Office website, "June 3, 2014 election sample ballot," archived May 21, 2014
- Porterville City Government website, "Charter Review Committee informaiton," accessed May 21, 2014
- Orange County Elections Office website, "Impartial Analysis of Measure A," archived May 9, 2014
- Orange County Register, "Editorial: Yes on Orange County Measure A," May 2, 2014, archived May 15, 2014
- Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
- Reuters, "Stockton bankruptcy judge to decide if pensions should share losses," May 13, 2014
- Chicago Sun-Times, "Preckwinkle throws in the towel on county pension reform plan," May 30, 2014
- San Jose Mercury News, "Pension reform: Slowed by judge's ruling, San Jose delays key part of Measure B," May 1, 2014