Controversial Public Employee Pension Initiative May Appear on June 5 Ballot

Backers of an initiative that would make major changes to public employee pensions have until June 5 to submit enough valid signatures to qualify the measure for the November ballot.

The Pension Reform Act of 2014 would eliminate the constitutional protections for vested pension and retiree health care benefits for current public employees for future work performed.

It would also permit governments to reduce employee benefits and increase employee contributions for future work if retirement plans are substantially underfunded or the government declares a fiscal emergency.

Governments whose pension or retiree healthcare plans are less than 80 percent funded would be required to prepare a stabilization report specifying non-binding actions designed to achieve 100 percent funding within 15 years.

If the initiative were to become law, it would result in a potential net reduction of hundreds of millions to billions of dollars per year in state and local government costs, according to an analysis prepared by the Legislative Analyst and Department of Finance.

The analysis also found that the net savings, emerging over time, would depend on how much governments reduce retirement benefits and increase salary and other benefits.

The measure would result in increased annual costs -- potentially in the hundreds of millions to billions of dollars -- over the next two decades for the governments choosing to increase contributions for unfunded liabilities, more than offset by retirement cost savings, according to the analysis.

There would be increased annual costs to state and local governments to develop retirement system funding reports and to modify procedures and information technology. The costs could exceed tens of million of dollars initially, but would decline in future years.

"There is no denying the impact that the rising cost of public employee pensions has had on municipal budgets in our state and across the nation," said Anaheim Mayor Tom Tait, one of the initiative's five proponents.

"The huge unfunded liabilities in our state's pension funds pose significant risks to local governments' ability to meet our obligations to retired employees. Cities need the proper tools to protect basic services while ensuring the retirement security retired employees. This proposed measure gives us those tools."

Dave Low, the chairman of Californians for Retirement Security, the group opposing the initiative, called it a "poorly crafted measure" that will "not only add to the retirement crisis in our state by eliminating vested retirement benefits for teachers, nurses, firefighters, school bus drivers and other employees, but also cost our communities and state billions of dollars."

"This measure would be a financial disaster for taxpayers and retirees alike," Low said.

Backers of the initiative received permission Tuesday from Secretary of State Debra Bowen to begin gathering signatures.

Valid signatures from 807,615 registered voters -- 8 percent of the total votes cast for governor in the 2010 general election -- must be submitted by June 5 to qualify the measure for the November ballot, Bowen said.