Conservatives’ attack on public pensions is deeply flawed

The Pacific Research Institute, a San Francisco-based, conservative think tank, issued a report last month entitled, “Pension Intervention: Reforming California’s Public Employee Retirement Systems.” The report suggested that “old fashioned” intervention was needed immediately, such as when “family and friends gather together to stop a loved one from self-destruction.”
The PRI report was a call for public employees to see the unfairness in the current pension system and demand its destruction. The report’s authors appear to believe that if they present enough numbers, enough people will rise up against the system and overturn it. Not really a conservative thought, is it?
But that job will take a lot more work than that and far more creativity. The conservatives must demonstrate they are capable of the hard work ahead. We’ll give them a road map–whether they’ll start walking it is up to them.
Re-frame the issue. Republicans successfully eliminated the inheritance tax in California, and then did the same thing at the national level. Well over 98 percent of the population never encountered this tax–and it wasn’t in their interest to eliminate it.
But by re-framing the inheritance tax as a “death tax,” and convincing enough people that you shouldn’t have to pay taxes just because you died, the tax was eliminated.
Capitol Weekly (and British newspapers, we will add) regularly reframes government pension payments. For example, Sacramento’s city manager, Bob Thomas, recently retired and was well on his way to a $150,000 per year pension. At a 3 percent real rate of return, he’d need a pension fund of $5 million to cover those payments. In essence the City of Sacramento provided Thomas with a $5 million pension fund. Why not say it that way?
At the end of his tenure, for those who follow Sacramento city politics, Thomas negotiated a $80,000 tip by indicating he really wanted to leave the job in May 2006, but if the Council wanted him to go in December, he’d gladly do so for an extra $80,000. The man was being awarded a $5 million pension, and then said he wanted $80,000 more. And he got it!
Jon Coupal, president of the Howard Jarvis Taxpayers Association picked up on this concept a couple of years ago and wrote an article entitled, “Public Employee Millionaires.” This article can be found on the web at www.hjta.org/calcommentaryV2-32.htm. In reality, it will be the taxpayers who will rise up and overturn the current public pension system, not the employees. And few taxpayers have million-dollar pension funds.
Focus On The Top. Governor Schwarzenegger was tripped up by those public employees in closest contact with the voters–teachers, firefighters and police officers. A more dramatic example would be the very top level public employees–city managers, superintendents of schools and so forth. These people know how to work the system, and they never cease to be creative in working the system to enhance their pay and pensions. Thomas, for example, received a “retroactive” $19,000 pay raise the month he retired. The pay raise increased his pension by approximately $14,250 year–a total of $427,477 over 30 years!
Court Cases. To promote change is a liberal idea. From the civil rights movement, the conservatives would have an example of how to do it effectively–and the courts are one place to turn. For example, we wrote last week that a state employee retiring at age 55 after 20 years of work receives a pension paying 20 percent lower than a state employee retiring at age 65 after the same 20 years of work. There’s a basis for a court challenge to existing pensions systems right there.
Public pension benefits have been granted by a broad array of means–sometimes by union agreements, sometimes by statute and sometimes by letter of agreement. By selecting their court cases in the same careful manner utilized by Thurgood Marshall in selecting segregation cases in the 1950’s, the conservatives have a chance to destabilize the legal basis of many public pension systems and changes in benefits. The city attorney in San Diego is trying this approach just that as I write this.
San Diego Bankruptcy. Speaking of San Diego, the conservatives should be heavily involved in these cases. Through ineptitude, and ineptitude alone, the city has found itself in a legal morass. Most other California governments have under funded their pension systems as well and are in fundamentally in the same position as San Diego. However, San Diego is washing its laundry in public.
If the city of San Diego is forced into bankruptcy, moves will be made to eliminate current labor agreements, reduce pension benefits for current and retired city employees, and the city may free itself from all outsourcing restrictions. It would serve as a model to conservatives on how to reduce government. They should be providing attorneys for free–just for the experience!
Unfairness of Current Pension System to Public Employers. In the end, the employees will not rise up against a system that pays them nearly five times the alternative. However, individual public agencies have an interest in reducing their costs and they have the wherewithal to wage long and costly legal battles. For example, when a Coastal Commission employee leaves state employment after 7 years on the job, the employee receives a refund of approximately $25,000–their pension contribution plus interest.
However, the Coastal Commission paid almost $50,000 to CalPERS for this employee’s retirement. When the employee leaves and doesn’t get a pension, CalPERS simply keeps the money.
Defined-benefit pension systems are structured around a socialization of expenses–pensions are paid for the most part by the employer contributions for employees who do not receive a pension. By turning this socialization on its head, conservatives would be able to launch a successful attack on the defined-benefit system–from the employer angle. But they’d have to be willing to think outside the box.
If you are a state employee and you are concerned about your pension, our advice to you is this–don’t be. We don’t think the conservatives have the fight in them for a long-term, multi-prong, city-by-city struggle that would be required for change. You can sleep easy tonight!

Ken Mandler teaches a monthly workshop on How to Land a State Job. The workshop focuses on a variety of tactics and strategies designed to make the state job process an effective one for you. The workshops are 3 _ hours and include over 400 pages of information for your review. The cost is $75. The next workshops are scheduled for Saturday, March 25th 9 AM-12:30 PM and Thursday, April 27th 6:30-10 PM, You can sign up by calling (916) 443-6788 today!