Pension Hotspots: Piedmont, CA, Chattanooga, TN and Sonoma County, CA
By Josh Altic
- The Pension Hotspots Report is a monthly publication about local pension reform efforts.
As of February 28, 2014, four pension related measures have been proposed. One of these has been approved and the remaining three are pending. This edition of the Pension Hotspots report contains the latest information on Measure A in Piedmont, CA, the pension compromises negotiated in Chattanooga, TN, the pension system difficulties faced by Sonoma County, CA and a recent CalPERS board vote to increase required pension contributions from state, city and other local pension systems.
Piedmont voters overwhelmingly approve a bond measure to refinance pension debt:
On February 4, 2014, almost 2,800 voters, 33.7 percent of the 8,268 registered city electors, cast a vote in Piedmont, California, on Measure A, a bond measure dedicated to refinancing pension fund debt. These voters overwhelmingly approved the measure by an 82.62 percent super-majority, authorizing the city to borrow $8 million dollars to refinance its debt owed to a CalPERS side fund at a lower interest rate. City officials have estimated that refinancing will save the city between $600,000 and $700,000 over the projected nine year life of the loan.
- Election results from Alameda County Elections office
Chattanooga officials strike deal with Fire and Police Pension Fund Board:
According to city officials, when the stock market crashed in 2008, the Chattanooga pension fund lost a third of its assets. In 2013, Mayor Andy Berke appointed a pension task force, which worked with the Fire and Police Pension Fund Board to agree on reform of the fire and police pension system, allowing the city to save $200 million over the next quarter century. On February 25, 2014, the city council approved the revised plan for city safety employees that was agreed to by the Pension Fund Board.
There is also a veto referendum measure going before Chattanooga voters on August 7, 2014, concerning a city ordinance that would extend the health benefits plan of all city employees to their domestic partners. Voters will have a chance to reaffirm the city's ordinance or reject it.
| Historical election results|
Sonoma County, CA
Sonoma County Taxpayers Association applauds Sonoma County's negotiated pension reforms but believes more aggressive steps are necessary:
Mayor Chuck Reed (D), who has been an outspoken advocate of public pension systems moving from defined benefit plans to 401(k)-style, defined contribution plans both in his own city in 2012 and the state of California as a whole, spoke to the Sonoma County Taxpayers Association at its February 27, 2014, meeting about the need of cities and counties to quickly stem the ballooning costs of employee retirement in order to avoid the loss of essential government services in overwhelmed budgets.
Reed said, “It has to get pretty bad to motivate people to action (but) if you wait until things are pretty bad then it might be so late you have no option but bankruptcy.”
Sonoma County has seen their pension costs, including bond debt, increase to $98.3 million. The county has negotiated deals with unions involving increases in contributions from employees and changes to pension payment calculations. These deals, made largely in 2013, were estimated to save the city $13 million per year. While the Taxpayers Association, which is supporting a ballot measure to completely overhaul the public pension plan in the county of Ventura going forward, approved of the reform that Sonoma County sought out, it also advocates even more aggressive steps towards reigning in pension costs.
This has caused unions and labor representatives to speak out against Reed and the Taxpayers Association, condemning the idea of pension reform on the ballot before it has even been proposed. Steve Stallone, spokesman for SEIU local 1021, the union representing the largest segment of Sonoma County's workers, said, “The basic thing is that pensions should not be put to a vote, decided by a vote. They were established by collective bargaining, they should be decided by collective bargaining.” Lisa Maldonado, executive director of the North Bay Labor Council, said, “The Sonoma Taxpayers and Reed are a good match because they both use right-wing ideology to spread lies about working people while supporting the special interests and their 1 percent CEOs and managers.”
Signature deadline for Phoenix pension initiative looms on March 14, 2014:
Citizens for Pension Reform are working with the Arizona Free Enterprise Club in Phoenix Arizona to put a pension reform initiative on the ballot to change the city's retirement system from a defined benefit system, in which retirees are guaranteed payments despite poor investment performance, to a 401(k)-style defined contribution plan. It would also seek to put a stop to public employee pension spiking, in the city where supplementing the Phoenix City Retirement Plan cost taxpayers just $28 million in 2000, ballooning to $110 million in the 2012 fiscal year and $253 million a year later. Proponents are looking ahead to next month at the fast approaching March 14, 2014, deadline for turning in the 25,480 valid signatures required to qualify the measure for the ballot.
CalPERS Board votes to increase pension contributions from state, city and other local government agencies, which translates to an increase in employee contributions:
On February 18, 2014, CalPERS board members voted to increase state, city and local government agency contributions to pension systems beginning in summer of 2014. This means larger contributions from each worker will be required going forward, with some employees experiencing the additional loss of 0.75 percent of their salaries to the pension system. Gov. Jerry Brown (D) approved these steps as "important and responsible action."
Arizona Supreme Court rules pension cost of living raises are protected by the Arizona Constitution:
Arizona's Constitution in Article 29, Section 1 declares that "membership in a public retirement system is a contractual relationship that is subject to article II, section 25, and public retirement system benefits shall not be diminished or impaired." The Arizona Supreme Court ruled on February 20, 2014, that the attempt by state legislators in 2011 to reform the Arizona public pension fund by, in part, putting a stop to cost of living raises in pension payments violated this clause of the constitution. This ruling puts about $375 million in pension expenses back on the plate of taxpayers.
Rep. John Kavanagh (R-23) said, “This ruling wipes out most of the pension-saving reforms we enacted a few years ago. This will cost a lot of money and a lot of taxpayer money to buttress this system that has been poorly managed.”
Supreme Court Judges refused to make the ruling based on certain constitutional contract protection clauses, basing it, instead, solely on the clause regarding public pensions explicitly.
List of 2014 local pension measures
- 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 Healthcare 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 Healthcare," January 16, 2013
- Bloomberg Politics, "Detroit Bankruptcy Prods Cities to Target Pensions: Muni Credit," February 27, 2014
- Time, "This Is How You Fix Ailing Public Pensions," February 26, 2014
- Washington Post, "In San Jose, generous pensions for city workers come at expense of nearly all else," February 25, 2014
- City Watch, "Will We Have a Pension Tax?" February 25, 2014
- Smartvoter.org, Piedmont Measure A information, accessed January 16, 2014
- The Chattanoogan, "City Council Unanimously Approves Revised Fire And Police Pension Plan," February 25, 2014
- Chattanooga Government website, "Pension Tax Force information," accessed February 28, 2014
- The Chattanoogan.com, "City Council Declines To Repeal Domestic Partners Ordinance; Voters To Have Say In August; Petition Group Hits Decision," January 7, 2014
- The Press Democrat, "San Jose mayor Chuck Reed pitches pension changes in Santa Rosa," February 27, 2014
- Pension Reform Task Force Presentation Document
- Free Enterprise Club website
- World Socialist Website, "California board votes to increase pension contributions as benefits face attack," February 26, 2014
- AZCentral, "Court’s pension ruling could cost Arizona taxpayers millions," February 20, 2014
- Washington Times, "Arizona high court bars cuts to public pensions," February 20, 2014