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• California Budget Project
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Anti-union former Assembly member files initiative to gut public employee pensions

June 22, 2007 – Nearly two years after his failed attempt to gut public pension funds, Governor Schwarzenegger admitted his plan was deeply flawed. In an opinion piece published in the December 29, 2006 Sacramento Bee, he said "I backed a proposed initiative that was poorly drafted." Instead, in keeping with his recent moderate approach, he formed a bipartisan commission to study public pensions and recommend policy.

Unfortunately, not all of the individuals involved in that 2005 effort to undermine the pensions of public employees have seen the light. One, Keith Richman, announced in June 2007 he was filing a new ballot initiative to try again ("Initiative would take on pensions," Sacramento Bee, June 22, 2007). The CFT will be fighting this new attack on our right to have retirement with dignity after years of public service.

Background
In spring of 2005, Governor Schwarzenegger announced he was withdrawing his half-baked pension "reform" ballot initiative from circulation, due to the "misperception" that it separated widows of fallen firefighters and police from their spouse's death benefits. (It wasn't a misperception; it was part of the badly written, poorly-executed ballot initiative.) But the battle was far from over, even following his special election losses in November 2005. Destroying public pension funds is a top priority of ultra-conservative forces nationally. The issue is not going to go away.

Schwarzenegger recently acknowledged as much. In an interview with the San Francisco Chronicle editorial board, "Schwarzenegger said he would continue pushing for changing the way political voting districts are set and for altering how government pays state workers' pensions" (San Francisco Chronicle, October 12, 2006).

Few public education employees—certificated or classified—embark on their careers with an idea of achieving great financial gain. But they do expect and deserve fair compensation within the constraints of public budgets. One of the consolations offsetting less-than-stellar paychecks has been the anticipation of a secure retirement benefit at the end of the work rainbow.

But in his January 2005 "State of the State" speech, Governor Schwarzenegger proposed to dismantle two of the largest, most stable and successful defined benefit pension programs in the nation—the Public Employees’ Retirement System (PERS) and State Teachers’ Retirement System (STRS)—and replace them with defined contribution programs, in the name of “fiscal responsibility.” He proposed the same so-called reform for the University of California's smaller but still important UCRS.

(Defined benefit funds promise a guaranteed regular retirement payment based on years of service and ending salaries; your payment under defined contribution plans depends on how much money your contributions have gained or lost in value over time.) PERS and STRS have a combined portfolio of nearly $300 billion.

Corporations want two tiers
With these actions, Schwarzenegger offered a view of the future that resembles private sector management proposals over the past few years. Take-back demands at the table in supermarket, airline, auto, and hotel collective bargaining negotiations, for instance, have been pushing two-tier health and retirement packages that seek to divide the workforce and save money on the backs of new hires. They propose to accomplish this by mostly maintaining the packages for current workers (although not always) while slashing benefits for future hires.

Certificated and classified staff in our schools and colleges should not have to worry about whether they will be able to make ends meet after their years of service have concluded. Defined contribution programs are a good supplement for individuals’ retirement, but are too risky to rely on for the old age of hundreds of thousands of teachers and school employees.

Collective security, not individual risk
The idea of privatizing pension funds is as distasteful to teachers and other school employees as the idea of privatizing Social Security is to most Americans. The point of a large, publicly guaranteed retirement fund is that it is collective security. PERS and STRS are model public pension programs. They return well on their investments; they have strong public oversight; and they perform their central function—providing people with a livable income after years of public service—in an efficient manner.

So what gives? Corporations want to roll back public sector pensions for two reasons. First, as they reduce or eliminate their own private defined benefit plans to boost their profits at the expense of their workers, their greed is more readily revealed by comparison with ongoing decent public pensions. Portraying public pensions as "overly generous," or as special perks for public employees, helps to reduce the risk of a poor corporate public image on the issue. Second, less visibly, the anti-defined benefit push represents a corporate counterattack on efforts by public pension fund trustees to demand accountability from corporations in which the pensions invest. 

As former state treasurer Phil Angelides noted, “Public pension funds have taken a leading role in restoring honesty, integrity, and openness to our nation’s financial markets after corporate scandals shook the very foundations of our financial institutions, damaged our economy, and harmed millions of Americans.”

It's not as if the pensions delivered through STRS are overly generous, as right wing ideologues like State Senator Tom McClintock charge. The average STRS monthly benefit is $2448—less than $30,000 per year for a teacher to live on. PERS pays out $1792 per month. These are hardly golden parachutes. Rather, they represent a simple measure of dignity—and often the difference between eating well or catfood—for the golden years of public servants.

The governor's efforts on behalf of the anti-public employee extremists were set back by the November 2005 election results and his own missteps. TIme will tell if his commission is a genuine bi-partisan effort to deal with potential problems, or a mechanism to return to the attack.

But the goal of corporations and ideologues to destroy public pension funds remains the same, as former Assemblymember Richman's new initiative reveals. We have a lot of work to do before we can rest assured our retirement systems are safe from corporate piracy.

For good recent articles on what's at stake in this battle:

• "The pension debate: real problem or red herring?," Anthony York, Capitol Weekly, August 16, 2007
• "Is $2,300 a month too lavish for teachers' retirement?," Marty Hittelman, Capitol Weekly, August 16, 2007

Order a copy of Insult to Injury, a 15 minute DVD on the governor's original pension proposal produced by the CFT, starring CFT members and former State Treasurer Phil Angelides.