Economy & Budget

Not just Wisconsin: California portends bad news for public-sector unions

Not just Wisconsin: California portends bad news for public-sector unions

While most of the nation’s attention was focused on Wisconsin’s recall elections, other local governments were taking important steps toward breaking free of public-sector unions, as well. Scott Walker’s victory shows us that, despite all the noise, unions are in decline in traditionally Democrat-leaning Midwestern states. But, in some ways, two local elections in California may portend even bigger things for the reformists.

When you’re looking for public-sector union carnage, there is no better place than California, a solidly Democratic state where pension-plan funding for government employees is more than $500 billion in the red. Gov. Jerry Brown’s tepid 12-point pension reform plan hasn’t gone anywhere in the state legislature, but  two of the state’s — and country’s — biggest cities dealt unions major setbacks Tuesday.

In San Diego, payments into the public-employee retirement fund went from $43 million to $231.2 million — or 20 percent of city’s general fund – in little over a decade. So it’s not surprising that two reform proposals easily won over voters.

Proposition A prohibits San Diego from using union-only “Project Labor Agreements” – which force the city to accept prevailing union wages and health care coverage — to be instituted on municipal construction contracts, opening up competitive bidding and saving the city millions. Voters approved the measure, even though California’s Brown recently signed a bill that would deny any state construction funds to a city that bans union friendly agreements.

Proposition B will reform city pensions plans by moving all city employers (except for police officers) from defined benefit plans to an effective 401(k) akin to those in the private sector. It also calls for initiating a five-year freeze on the portion of union salaries used to calculate future pension payouts. At last count, around 70 percent of voters supported Proposition B.

It is estimated that the plan would save the city nearly $1 billion over 30 years.

Not surprisingly, unions — champions of “democracy” — launched a legal challenge against Proposition B even before any San Diegan had an opportunity to vote on the matter. Courts ruled that the measure could be litigated after the election, so expect it to be tied up in courts for a while.

Then there is the case of San Jose, where pension payments jumped from $73 million in 2001 to $245 million, or 27 percent of the general fund budget.

It’s also a city where Democrats solidly outnumber Republicans.  Yet, a Democrat Mayor, Chuck Reed, and an 8-3 Democrat majority in the city council championed a reform labor measure. Reed claimed it was his “No. 1 priority because it’s the biggest problem we face. It’s a problem that threatens to our ability to remain a city and provide services to our people.”

In this city, police and firefighters are given lavish retirement plans that should be the envy of public-employees everywhere.  “Our police and firefighters will earn more in retirement than they did when they were working,”  Reed once explained.

As in San Diego, pension reform passed easily here.

Measure B institutes a program that makes the current beneficiary pay up to 16 percent of their salaries to extend their retirement plan or, surrender that plan and move to one that provides benefits in line with the private sector. It also limits retirement benefits for future hires by requiring them to pay half the cost of a pension, it also suspends pension raises for up to five years when the city declares a fiscal crisis and it will discontinue “bonus” pension checks for retirees, among other things.

Yolanda Cruz, president of the Municipal Employees’ Federation, the city’s largest union, said that the passage was “an unfortunate way to spend taxpayer money fighting it in court because we will definitely take it there. Taxpayer money would be better used getting services back.”

Unions may know a lot about the unfortunate spending of taxpayer money, but though all these initiatives will end up in courtrooms — so much for “Power to the People!” — the mood of voters is unmistakable.

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