This story originally appeared in Capital & Main.
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When Democratic former San Jose mayor Chuck Reed and Republican ex-San Diego councilmember Carl DeMaio finally unveiled the language for a promised attempt at getting a statewide public pension cutting measure to 2016 voters, the expectation was that Reed II would be a reined-in and more realistically-framed version of Reed I – last year’s failed attempt at undermining the public pension system.
That try for the 2014 ballot was aborted after Attorney General Kamala Harris slapped it with a candid, albeit politically untenable summary that frankly described the proposed constitutional amendment as targeting longstanding legal rights—rights that protect the pensions and retirement health care of the 1.64 million Californians enrolled in the state’s public pension systems.
But even veterans of the state’s public-sector retirement wars were unprepared for the sheer scale of what awaited them this time around. Amid the deceptively simple wording contained in the laudable-sounding “Voter Empowerment Act of 2016,” Reed-DeMaio concealed a hidden trigger that is now being recognized as a wholesale attempt to uproot 60 years of statutory law and a critical foundation of labor relations.
Simple Language Conceals Back-Door Attack
While its language won’t shock the public like some notorious headline-grabbing initiatives, it’s exactly the innocuous front that makes the far-reaching Reed-DeMaio a dangerous initiative.
“I’ve looked at a lot of initiatives, and this one’s pretty far out there,” Sacramento labor attorney Lance Olson told Capital & Main. “We’re not talking about killing gay people, but we are talking about some pretty important rights, including those things that were promised to government employees when they started their careers in government.”
At first, people barely noticed. The measure seemed to fulfill pension reformers’ dream of dumping at least the state’s future workforce into 401(k)-styled plans.
Reed’s conservative supporters immediately praised the “bipartisanship” of the measure. They also lauded “the simplicity of approach.” Like earlier attempts at rolling back pensions, it proposes rewriting California’s Constitution to eliminate defined benefit pensions for new public-sector hires. It then politically seals the deal by requiring local voter approval on any new benefit plans. Labor groups blasted the measure as yet another doomed attempt to eliminate the retirement security of the state’s public workforce.
The earliest glimmering that Reed-DeMaio might be far more deeply radical than it seemed came a mere day after its official launch. Writing in the June 5 San Diego Union-Tribune, conservative columnist and Reed ally Steve Greenhut made the extraordinary claim that “The initiative takes aim at the “California Rule,” but in a backdoor way.”
The 60-year-old “California rule” established that the retirement plan in effect at the time of a public employee’s hire can’t be changed unilaterally—it is in essence part of a contract made at the moment of hire. That puts the “deferred compensation” of pension benefits under the ironclad umbrella of the California Constitution’s Contract Clause as a primary vested right, and also makes future pension benefits earned at the job a collateral right.
Greenhut’s remark did not go unnoticed. Amy Brown, the publisher and editor of the influential statewide monthly, Public Retirement Journal, and PRJ lead investigative reporter Dora Noegel were already putting Reed-DeMaio under the microscope for their June cover feature. PRJ’s specialty is reporting on public sector pension issues and providing in-depth analyses of proposed laws that impact California’s defined benefit government employee pension systems.
What Brown and Noegel saw couched in the measure’s elliptical language amounted to a bombshell. “This goes well beyond [Reed’s] first attempt in terms of attacking public pensions and public employees in California,” Brown told Capital & Main.
“The part that surprised me about this one is [its attack on] compensation itself and the unraveling of the collective bargaining system in California,” added Noegel. “There’s a really extensive collective bargaining system to preserve the harmony of public employment. And this would completely unravel that. I was surprised that he wanted to go there.”
The women quickly zeroed in on Greenhut’s “backdoor,” the oddly-worded subparagraph (j) of the amendment’s Section 23, which at first glance seems to preserve for current public employees the defined benefit pensions and retirement benefits that it eliminates for new hires: “Nothing in this section shall be interpreted to reduce the retirement benefits earned by government employees for work performed,” it states.
In the wonk-speak of public-sector retirement law, the seemingly innocuous words “for work performed” turn out to translate not only as a back-door forced entry into public-sector retirement security, but represent a ticking redefinition of terms that would be poised to trigger the repeal of the California rule.
“Basically,” Brown explained, “the proposal attempts to eliminate all vested benefits rights for future and current employees.”
“When [the measure is] referring to ‘benefits already earned,’ that serves a purpose,” Brown explained, “because you’re looking at a current employee, who’s had maybe ten years of service credit, they’re in the middle of their career, they’re planning on the promises that were given to them when they were first hired. They may not be vested in, say, retiree health care or whatever, and then from [year] ten through twenty, those can be dramatically decreased.”