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Pension Hotspots: Ventura County petitioners turn in signatures, supremely confident their measure will qualify for the ballot

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April 25, 2014

By Josh Altic

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

As of April 25, 2014, five pension related measures have been proposed. One of these was approved, one was defeated and the remaining three are pending.

This edition of the Pension Hotspots report covers the submission of over 40,500 signatures by petitioners seeking to qualify a pension reform initiative for the November ballot in Ventura County. It also features stories about the efforts of four high profile cities in California, Indiana and Illinois attempting to rein in rising pension costs and hold off pension fund insolvency.

Ventura County, CA

The Committee for Pension Fairness turns in roughly 41,000 signatures for pension reform initiative, petitioners confident it will make the ballot:

On April 23, 2014, the committee behind the Ventura County pension reform initiative turned in over 40,500 signatures to the county clerk, needing about 26,000 of them to be valid in order to qualify its initiative for the November ballot. Now petitioners, who are very confident in the sufficiency of their petitions, wait while the county elections office certifies the signatures and decides whether the measure will appear before voters in November.[1][2]

Petitioners gathered signatures from tens of thousands of Ventura County residents in less than 70 days, turning in the petitions well before the deadline. Ventura County Supervisor Peter Foy said, “The people know that Ventura County’s current pension system is unsustainable and is draining precious resources that could be spent on meeting unmet public and civic needs. With this [initiative], the people have the opportunity to take charge – as it should be. They have made it clear they want their voices to be heard.”[3]

Referring to the signature gathering process and the support he expects from voters, Jonathan Wilcox, a spokesperson for the pension reform committee, said, “We are supremely confident that we have turned in far more than enough valid signatures. Based on the overwhelming response we received in our signature gathering efforts, we believe they will be with us in overwhelming numbers.”[4]

David Grau and Dick Thomson, co-chairs of the committee behind the initiative, said, “This is truly a historic day and a remarkable achievement for our grassroots, volunteer-driven campaign. This isn’t our battle alone – it’s the people of Ventura’s. In overwhelming numbers, they have made it clear they want a decisive say in their fiscal future.” They added, "For decades, the unions and the politicians have had the only seats at the table – it’s time for the people to weigh in and achieve the kind of reforms that this flawed system simply isn’t capable of delivering. We can’t wait any longer. Soon, we won’t have to.”[3]

Petitioners about to submit pension initiative signatures
Boxes of pension initiative petitions about to be submitted

Meanwhile, as it becomes clear the county will likely see this initiative on the ballot, interested voters and officials consider a report by Reason Foundation, a Los Angeles-based libertarian research organization. The report claimed that the initiative, if approved, would save county taxpayers $460 million over 15 years and eliminate $1.8 billion in county debt. Proponents of the initiative hailed this report as strong evidence in favor of the initiative. Critics, including Steve Bennett, chairman of the Ventura County Board of Supervisors, were leery of the report and suspected bias from Reason Foundation, opting to withhold their conclusions until they have seen the county's official actuarial report on the initiative, which is being conducted by Segal Consulting.[5]

Recent News

City auditor of Oakland, CA, warns that the city is rushing headlong towards insolvency and blames the city's defined benefit pension system:

On April 20, 2014, Oakland City Auditor Courtney Ruby released a report stressing the decreasing police force, increasing disrepair of roads and the city's looming tipping point into insolvency. The culprit responsible for the sticky financial situation of the city is, according to Ruby, the ballooning annual payments required to keep the public pension fund afloat. Since 2003, the city's annual pension costs have jumped from $37 million to $89 million in 2012. This 140% increase is merely the symptom of a sickly pension system weighed down by massive debt not backed up by assets. Ruby reported that, according to estimates and figures used by CalPERS, the city's pension and retiree healthcare funds have $1.5 billion in unfunded liabilities. Ruby said that, when market-based interest rates and figures are used, the city's retirement benefits debt jumps to $2 billion and reveals a system that is only about 67 percent funded.[6]

According to the auditor's report, the $52 million jump in annual pension costs is stealing the city's power to provide basic services. Besides highlighting the problem of insolvency and the risk of bankruptcy, the increase alone in annual pension costs over the last decade could pay for 300 additional law enforcement officers for the city's ailing police department or extensive street repair to counter the city's growing number of potholes. Ruby said, "Oakland has to get its head out of the sand and be very clear that we have significant unfunded liabilities and we have to have a plan to deal with this. It's such a complicated problem that there is no prefabricated solution."[6]

Ruby's report blames the city pension system's defined benefit plan - a plan that guarantees benefits to city employees despite fluctuations in market performance - for the city's current plight. Ruby wrote that, when the market crashed, city employees still drew the same retirement packages that were based on optimistic, pre-recession investment performance estimates, leaving the city's general fund and taxpayers responsible for making up the difference.[6]

According to Daniel Borenstein, writing for the Contra Costa Times, Ruby's research underestimated the problems faced by the city. Borenstein wrote that the city had only enough assets to cover half of its liabilities, rather than the two thirds estimated by the auditor's report. Everyone, however, agrees that city officials need to do something to keep the city from moving steadily towards bankruptcy. Ruby stated that CalPERS has tied the city's hands when it comes to forcing more moderate benefits on its employees. She suggested that the city needs to bargain with unions and ask employees to voluntarily give up some of their benefits in order to keep the city afloat.[6][7]

2014 Pension Measure Count
Number proposed:
8
Coming up:
3
Decided measures:
4
Number approved:
3
Number defeated:
1
States: California
Arizona
Missouri


Memphis Mayor A. C. Wharton Jr. proposes a 401(k) pension plan to replace the city's defined benefit plan, balancing a proposed 2015 budget with no increase in taxes:

Faced with an ailing pension system, Mayor Wharton proposed a move from the defined benefit plan currently offered to city employees to a 401(k)-style, defined contribution plan similar to retirement systems found in the private sector. Starting on July 1, 2015, the changes would apply to all city new hires and to the 2,428 existing employees who had worked for the city for ten years or less. This amounts to a little over a third of the 6,135 total city employees. Under the new plan, employees would put away eight percent of their income towards their own retirement and the city would match that eight percent investment. The employees' benefits would depend on contributions and investment returns, instead of being guaranteed by the city's general fund and the taxpayers.[8][9]

This city pension change was officially submitted to the city council as part of the mayor's budget proposal for 2015, in which Wharton suggested vamping up annual city pension payments from $20 million per year to $35 million in 2015. Wharton has his eye set on paying $100 million a year into the old pension system within five years in order to start paying off the fund's large pile of debt. Wharton also insisted on no new taxes in his budget proposal. The city council will now have several months to discuss the proposal and consider the pension reform proposed by the mayor. Council member Reid Hedgepeth told the mayor's administration, "We need y’all to come down here and tell us here [sic] are the efficiencies, here’s what we can live with, here’s what we can cut. We’ve got a $50 million to $70 million problem and we need to start coming up with how we are going to pay for it. We know we need to switch plans. We also need to know where we are going to get this money to start funding this thing.”[8][9]

Indianapolis controller proposes 401(k)-style system as his bid to reduce huge city pension costs:

April pension news also featured Indianapolis Controller Jason Dudich asking the council members of the consolidated city-county to consider creating a new retirement system for city employees that would operate under a defined contribution plan. Dudich proposes this as a long-term solution to increasing annual pension payments into the state's Public Employees Retirement Fund. In 2013, Indianapolis was forced to pay almost $56.7 million to this fund.[10]

Chicago proposes plan to increase property taxes and require more employee contributions as a compromise to deal with pension costs:

Chicago Mayor Rahm Emanuel has gone a different route than officials in Memphis and Indianapolis, proposing to raise taxes and increase employee contributions, rather than change the system entirely. Faced with estimates showing that, without reform, the municipal employee retirement fund would run out of money in 10 years, and the laborers fund would be insolvent in 16 years, Emanuel's administration has put forward a compromise between unions and city officials that would increase property taxes to bring in $750 million in additional revenue over five years. This money would be put into the municipal employee fund and the laborers fund, which are the two largest pension funds of the city. In return, retirees would consent to lower cost-of-living increases, and workers would contribute 11 percent of their pay towards their pensions, instead of the current 8.5 percent. This plan does not address the underfunded pension systems for teachers, police and firefighters.[11]

Laurence Msall, president of the fiscal watchdog group Chicago Civic Federation, said, "This is a good plan that will save these pension funds and help stabilize the city's pensions. It seems to strike a reasonable balance between the interests of employees who will pay more, retirees who will receive less benefit but greater security that their benefit will be there in the long term, and taxpayers who will have a city that stabilizes its finances.”[11]

The plan, which was approved by the state legislature, now awaits a signature from Gov. Pat Quinn (D), who has withheld his approval for over two weeks already. Some city officials are leery of the proposed property taxes, which would amount to a compounding annual increase of $50 per year - which comes to a $250 per year increase after five years - for the owner of an average $250,000 home, who already pays about $4,000 in taxes per year. Faced with disapproval from these city officials and several unions, Governor Quinn has not announced whether he will sign the measure or not.[12]

Looking ahead

PhoenixPensionInitiative.png

Last month's Hotspots report featured pension reform advocates in Phoenix, AZ, turning in more than twice the 25,480 required signatures to qualify their initiative for the ballot. The city clerk faces an April 30, 2014, deadline to complete signature verification. Because of the massive amount of signatures collected - over 54,000 - and the care taken by petitioners, the committee behind the initiative is very confident the clerk will announce that the initiative is certified for a voter decision.[13]

List of 2014 local pension measures

See also

External links

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References

Category:2014 ballot news