As he campaigned last fall, new Gov. Jerry Brown made it clear that one key element in fixing California’s huge financial problems would have to be big changes in public employee pensions.
Outgoing Gov. Schwarzenegger already achieved a little of that on the statewide level by negotiating several new contracts with public employee unions that will set up a two-tier system where new hires get somewhat fewer benefits than long-term employees hired under different conditions and promises.
Still, the majority of public employees work not for the state, but for cities, counties, school districts and other local agencies. One of them – the city of Vacaville – declared bankruptcy two years ago as a way to force unions to renegotiate both pensions and salaries. Then came scandals in cities like Bell and Vernon, where public employees and local elected officials exploited their constituents to an apparently illegal degree, both in terms of salaries and pensions.
Here Is Where It Begins
It’s clear, then, that any wide-ranging changes in public employee pensions will have to involve the locals.
That’s why it’s striking that Los Angeles Mayor Villaraigosa has stepped up in a surprising way. It’s unexpected for Villaraigosa, a former Speaker of the state Assembly and a onetime teachers union organizer, to be helping Brown in part because the mayor once thought he would be standing in Brown’s spot.
But Villaraigosa’s putative campaign for governor reached a sudden and early demise when he couldn’t keep his pants zipped up and his once-celebrated close marriage collapsed under revelations of an affair with a Latina television reporter. Now he’s divorced, with only one or two major offices potentially available to him after his second mayoral term expires in 2013.
Rather than just feel sorry for himself, Villaraigosa decided his best course was to attempt leaving a legacy, even if it offends some of his friends in the labor movement.
Some results of that decision are now before L.A.’s City Council, and others will be on the local ballot on March 8 in the form of a proposition that would make enormous changes to the city’s pension plan for police and firefighters. Those changes can apply only to new hires because, short of bankruptcy, federal laws prevent changes to pension benefits offered workers when they were hired.
The need for the changes is clear, best stated by Los Angeles City Administrative Officer Miguel Santana, who warned that unless something is done, civilian (non-police and non-firefighter) pension costs will amount to one-third of the city’s budget by 2030. L.A. now pays about $300 million a year in such pensions, from an annual budget of about $7 billion. By 2015, the pension cost will be $769 million, and it will keep growing as about 400 civilian employees retire each year at age 55, expecting to collect pensions for life based on their last year’s pay.
How the System Works
Changing civilian pensions can be done by City Council members, with a sign-off from Villaraigosa. Among the revisions: Local civil servants would, for the first time, have to start contributing to their health-care costs to the tune of about 2 percent of pay. Their pensions would be capped at 75 percent of workers’ average salary over their last three years in harness, and cost-of-living adjustments would be cut from 3 percent yearly to 2 percent.
Plus, the retirement age would rise from 55 to 62, graying the city work force considerably.
“The fact is that Los Angeles cannot continue down an unsustainable path,” Villaraigosa said. His March ballot measure would impose similar changes on new police and fire employees.
There’s a lot here for Brown to chew on as he begins to negotiate with the very public employees to whom his 1970s-era signature gave bargaining rights. He has an innate advantage over Schwarzenegger or any Republican who might possibly have won the governor’s office if he had not run: Because the unions know his role in the rise of their members’ benefits, they also know he’s not their enemy. That should make them more likely to work out compromises with him than they might with others.
Yes, public employee unions funded a good part of Brown’s campaign. But at least publicly, he never promised them anything but a place at the table as he tries to work out the budget solutions of which their contracts will have to be a part.
Villaraigosa now has given Brown a big leg up. Because he’s a former labor leader, unionists cannot see his actions as deliberate hostility, but rather will be forced to consider them pragmatic necessity. If they view the changes Villaraigosa is pushing that way, it’s bound to make budget-easing deals far easier for Brown to craft.
Mr. Elias may be contacted at tdelias@aol.com.
His book, “The Burzynski Breakthrough,” is available in a soft cover, fourth edition. For more Elias columns, visit www.californiafocus.net
