Domino Effect: Pension Cutters Gamble on a California Ballot Measure

9:29 am in Pension by Gary Cohn


 

Jon Coupal is nothing if not blunt when he describes one motive behind a Ventura County ballot measure that would replace the “defined benefit” pensions currently enjoyed by county employees and replace them with 401(k)-type plans for all future hires.

“This is meant to be a template for other counties,” Coupal tells Capital & Main. By that, the Howard Jarvis Taxpayers Association’s president means the measure’s conservative and libertarian backers see the “Sustainable Retirement System Initiative” as the newest and most promising weapon in their assault on California’s public employee retirement plans. Having failed to place similar measures on state ballots in  2012 and 2014, a coalition of wealthy individuals, anti-tax activists and government privatizers has seized on an aspect of California law that allows 20 counties to fashion their own public employee retirement policies apart from the CalPERS system that administers such policies for nearly all of the state’s remaining 38 counties.

Ventura, with its postcard shoreline, rugged mountains and groves of avocado and lemon trees, is one of the 20 so-called ’37 Act counties whose retirement systems operate under the County Employees Retirement Law of 1937. These range from Los Angeles County, the most populous in the nation with nearly 10 million people, to sparsely populated Mendocino County along California’s northern coast. Few people doubt that Ventura, which borders Los Angeles County, potentially represents the first domino in a series of future measures targeting public employee pensions.

“I guarantee you that when this passes,” Ventura County Supervisor Peter Foy has said, “in 2016 every ’37 Act county will have this on their ballot.” Foy, who was addressing a supervisor’s meeting, is a strong advocate for the county ballot initiative. He also happens to have served as chairman of the state chapter of Americans for Prosperity, the radical corporatist group funded by billionaire David Koch. (Foy, who has in the past denied such a connection with Koch, did not return multiple requests for an interview.)

County employees are generally paid less than their private sector counterparts and have long counted on traditional defined benefit plans as a kind of economic equalizer. The Ventura measure would phase out these retirement plans for anyone hired after July 1, 2015 and throw future retirees’ pensions into the riptides of Wall Street trading. (During the last stock market crash and resulting recession, an estimated $16 trillion in household wealth was lost in America.) Furthermore, new employees would be ineligible for the county’s existing death and disability plan. Although the initiative states a new death and disability plan “shall be established by the Board of Supervisors,” it provides no details about its terms.

“Ending the defined benefit plan is a time-bomb disaster for lower income people,” cautions Steve Bennett, chairman of the Ventura County Board of Supervisors. “It’s very difficult for them to save and they won’t be able to maneuver the 401(k) [system] to appropriately invest their savings,” Bennett told Capital & Main.

Proponents argue that the current system is not financially sustainable and is forcing Ventura County further into debt. Critics, however, say the claims of financial doom are greatly exaggerated and they counter that if the measure is adopted it will be harder to attract and retain good employees, particularly in the area of public safety.

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