Pension Hotspots: 2014 Year in Review

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December 23, 2014

By Josh Altic

The Pension Hotspots Report is a monthly publication about local pensions and pension reform efforts.

Ten pension-related measures were proposed for 2014 elections. Five of these were approved and two were defeated. Court decisions removed the initiatives in Pacific Grove, California, and Ventura County, California, from the ballot. A measure in San Jose seeking to alter previously approved reform was also ultimately not put on the ballot.

This edition of the report serves as a year-end review and summary of all 2014 pension related measures covered by Ballotpedia.

2014 local pension measures

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All of the pension-related measures below were put on local ballots in 2014 and were approved by voters.

Approveda City of Yorba Linda Elimination of Pension and Health Care Benefits for City Council Members, Measure JJ (November 2014):

Upon approval, Measure JJ eliminated the pension and healthcare benefits for city council members going forward.[1]

Approveda City of Oakland Municipal Retirement System Termination, Measure EE (November 2014):

Measure EE authorized the city council to approve, given a 4/5 majority vote of council members, the elimination of the Oakland Municipal Employee's Retirement System (OMERS). The city would, under these circumstances, be responsible for purchasing annuities from a top-rated insurance company to continue paying the same retirement benefits to the remaining retirees in the OMERS system.[2]
The Oakland Municipal Employees Retirement System (OMERS) fund was created in 1939 to provide retirement benefits to non-public safety city employees. In 1970, the fund was made unavailable for new hires, as the city chose to contract with CalPERS for its retirement system. As of June 2014, the fund was fully funded and provided benefits to 22 remaining retirees and beneficiaries, which had an average age of 91. The plan had total assets equaling $4.8 million. The city's actuary estimated that, through Measure EE, the city could save $900,000 by purchasing private insurance annuities instead of winding down the OMERS system in a conventional manner.[2]

Approveda City of Piedmont Pension Debt Refinance Bonds, Measure A (February 2014):

At the time of this election, the city of Piedmont owed CalPERS $7.8 million in unfunded liabilities belonging to a side fund alone, which was separate from and in addition to the full CalPERS plans and liabilities covered by the city. The city was on track to pay this debt off over nine years, paying interest on the nearly $8 million at a rate that amounted to 7.5 percent. This measure allowed the city to borrow $8 million dollars to refinance this debt at a lower interest rate. City officials estimated that refinancing would save the city between $600,000 and $700,000 over the projected nine-year life of the loan.[3]

Approveda Orange County Board of Supervisors Pension Contributions, Measure A (June 2014):

Orange County employees, including elected and appointed officials, are required by law to contribute towards their pensions. Prior to Measure A, the county was allowed to pay these required contributions on behalf of the employee as part of an employment benefit. Measure A prohibited the county from paying these employee contributions for any members of the Board of Supervisors or any other elected officials in the county who started their term of office after the Measure A election on June 3, 2014.[4]

Approveda City of Porterville Authority over City Employee Benefits Amendment, Measure Y (June 2014):

Measure Y reaffirmed 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 also formally declared that the city of Porterville had full power over the creation, modification and elimination of its pension and retiree benefits.[2]

The two pension-related measures below were put on local ballots in 2014, but they were rejected by voters.

Defeatedd City of Phoenix Pension Reform Initiative, Proposition 487 (November 2014):

This was the most controversial and important pension reform measure that actually reached a local ballot in 2014. It proposed the complete overhaul of the Phoenix City pension system, moving new hires over from a defined benefit plan to a 401 (K)-style, defined contribution plan. This measure was strongly opposed by the unions in the city, especially the police and firefighters unions, which launched a successful, aggressive advertising campaign against Prop. 487. The measure was decisively defeated.

Defeatedd City of Springfield Police/Fire Pension Fund Sales Tax Measure (April 2014):

The defeat of this measure effectively renewed a sales tax used to supplement the city's underfunded pension system. If approved, this measure would have ended the 0.75 percent sales tax that was approved by voters in 2009 to help provide pension benefits to retired city police and fire personnel. By state law the tax was required to be put to a vote every five years, which was the reason for the April 8 election ballot question on the issue. Moreover state law required that the ballot question ask voters if the tax should be repealed, which led to the somewhat confusing situation of a "yes" vote causing the tax to be repealed and a "no" vote renewing the tax.[5]

The following pension-related measures were proposed for the ballot in 2014, but, either due to reconsideration by a city council or through a court decision blocking the measure, they were not ultimately put before voters.

Proposed ballot measures that were not on a ballot Pacific Grove City Initiative To Void Ordinance 02-18 Pension Increase (November 2014):

This initiative measure would have reverted pension payment boosts approved in 2002, removing the more generous benefits given to public employee retirees a decade before. The initiative's petitioners, although they collected a sufficient number of valid signatures, failed to convince the courts that the initiative passed legal muster. The courts allowed the city to keep the measure off the ballot.

Proposed ballot measures that were not on a ballot City of San Jose Pension Measure to Alter Measure B Reform Charter Amendment (November 2014):

This measure was proposed to soften pension reform measures approved by voters in 2012. According to Ben Field, head of the South Bay Labor Council, Measure B reforms were causing city employees to leave the city in droves. Field, however, didn't think the proposed changes would be enough to make the city an attractive employer again. Ultimately, the city decided not to put the measure on the ballot. It is yet to be seen whether the city council will take some other measures to refurbish the city's pension system.[6]

Proposed ballot measures that were not on a ballot Ventura County Sustainable Retirement System Pension Reform Initiative (November 2014):

The supporters of this initiative proposed it as a way to deal with the nearly $1 billion in unfunded liabilities - debt not backed up by assets - faced by the Ventura County pension system. In 2013, the county contributed $162 million - 17 percent of the county's 2013 budget - to its pension fund, which is 260 percent more than the 2004 county cost of $45 million. The "Sustainable Retirement System Initiative," if it had reached the ballot and had been approved, would have changed the pension plan of newly elected officials and newly hired employees from a defined benefit plan to a 401 (k)-style, defined contribution plan. The proposed plan would have also limited pension-based salary increases for five years, seeking to reduce allegedly immoderate pension payouts. Supporters argued that the initiative would have saved the county millions, while providing an attractive pension system that guaranteed county contributions to employee retirement funds designed to be under the control of the individual employees and entirely portable. Opponents argued the initiative was an attack on the retirement benefits of public employees and that it would have made it difficult to hire and retain quality employees. The court ultimately ruled - in a precedent-setting court case - that the county did not have the authority to opt out of the state system it was part of, making the initiative illegal and precluding its appearance on the ballot.[5][7]

Looking ahead

Phoenix residents may vote on pension reform for the third time in three years:

In the wake of the decisive defeat of Proposition 487, seeking to completely transform the Phoenix pension system, Mayor Greg Stanton created a Civilian Retirement Security Ad Hoc Committee to suggest other ways of reforming city pensions. The committee was formed with the intention of putting another reform bill before voters in the spring of 2015.[8]

Before any concrete proposals were announced, however, the committee came under fire from both sides of the pension debate. Scot Mussi, director of the Arizona Free Enterprise Club, which supported Prop. 487, expressed concern that the committee excluded strong fiscal conservatives. He said, "You need to have people on there who first and foremost are going to be looking out for the taxpayers. It doesn't seem like it's very balanced." But Frank Piccioli, president of the American Federation of State, County and Municipal Employees Local 2960, isn't happy with the chosen committee members either. He said, "I think the major concern is that we aren't included in the process. Because it affects us, we should be involved. We want something reasonable, of course." Mayor Stanton responded, "One thing that I have learned in leadership is to wait and see what the recommendation is before you start criticizing it. I guess I'll let them live with their preconceived conclusions."[8]

See also

External links

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Additional reading

References