Pension Reform Victories Give Supporters More Steam for the Fight

After engaging in labor negotiations for nearly four years, the city of Petaluma is getting ready to make an announcement that could include changes to public sector employee pensions, according to sources close to the negotiations.

“It’s not too exciting, but it’s progress,” said one source who has had a front row seat in the negotiations.

Labor negotiations are confidential because they deal with personnel matters.

The impending announcement comes at a time when pension costs continue to increase while California cities struggle with lower property and sales taxes. But after the success of two pension reform initiatives this month—one in San Jose, the other in San Diego— political watchers say there is new momentum for cities to tackle the challenge.

“The impact of the passage of those two proposals has the potential to ignite a firestorm of voter angst this November,” said David McCuan, a political science professor at Sonoma State University. “It’s become the new third rail of California politics and has huge ramifications for localities going forward.”

To get a sense of how much pension obligations eat away at Petaluma’s budget, consider this number: $6 million.

That’s how much the city will have to pay into the Public Employees' Retirement System (PERS) next fiscal year, which begins in less than two weeks. To put it into broader context, that’s 18 percent of the city's $32 million budget, meaning there will be less money for services like summer camps, streetlights, pothole repair, police officers and firefighters.

Under San Jose’s newly passed Measure B, workers will have to pay up to 16 percent of their salaries to keep their retirement plan or accept more modest packages. In San Diego, Proposition B will eliminate pension spiking, put a five-year pay freeze on the pensionable pay of current employees and switch all workers except police into 401-K type retirement plans.

Both measures were proposed by mayors and council members who watched their budgets come up short year after year, despite laying off workers and advocating for new tax measures.

"One line item has had the largest impact on our budget," Councilman Pete Constant told the San Jose Mercury News, "and that is pension contributions."

Recently asked why Petaluma has not proposed similar ballot initiatives, Mayor Dave Glass said that he lacked the authority to do so since Petaluma is a so- called “weak mayor city” where the mayor does not have any special power allowing him to put any issue he wants on the ballot, unlike in some larger cities.

Read more about the mayor’s role and responsibilities in the city’s charter (see section 20.)

But former councilman Bryant Moynihan, who has long advocated pension reform alongside lay offs of city employees in order to balanace the budget, the answer is simply inaccurate.

“The mayor or any council members together with the city manager can put an item on the agenda as a resolution to place it on the ballot and they refuse to do so,” Moynihan said, adding that the reticence about tackling the issue has more to do with the politically implosive nature of pension reform.

“November is around the corner and these (police and fire) unions carry a lot of weight. Nobody wants to cross them.”

Indeed, unions have filed lawsuits in both San Jose and San Diego following the passage of the reforms, claiming they were unconstitutional. Now all eyes will be on how local courts handle the litigation that will no doubt set an important precedent for other cities. 

(Fun fact: Meyers Nave, the same law firm providing legal services to the city of Petaluma, helped write the preemptive lawsuit the city of San Jose filed prior to the election and is defending the city in the ongoing litigation.)

“Everybody will be watching what happens there very carefully,” Glass said. “But I’m glad that Petaluma is not going through this and spending hundreds of thousands of dollars to see whether this is even constitutional.”

And while the legal battles in other cities unfold, proponents of reforms will be awaiting to see whether the impending announcement from City Hall amounts to real change or are mere bones to placate angry voters. 

Are you in favor of reforming public sector pensions? Why or why not? What's the best way to approach it?