reform

San Francisco’s Pension Crisis

November 13, 2011 By Judith Miller Leave a Comment

A day before Halloween, glorious San Francisco weather brought hundreds of participants to “Pet Pride Day” at Golden Gate Park. As drums pounded and electrified folk tunes blared, children and parents, many in costume, paraded before a reviewing stand with their pets: dogs, cats, birds, a prize-winning hawk, chinchillas, rats, snakes, and even a puppy perched on a pony. Between a tent providing low-cost rabies injections and another offering “doggie makeovers” stood Jeff Adachi, the city’s public defender, shaking hands with passersby. As a lone campaign aide waved a bright blue ADACHI FOR MAYOR sign behind him, the candidate, a long shot in a crowded field of 16 mayoral aspirants, asked voters what was on their minds.

While several mentioned the push to let dogs run off-leash in more city parks—San Francisco supposedly has more dogs than children—others peppered Adachi with questions about bread-and-butter issues. Why was it was so tough to turn a property into condos? Why were the city’s schools so bad? Why were the ranks of the homeless growing? What was the environmental impact of lining parks’ soccer fields with ground-up tires? Why did the police ignore open-air drug dealing in the Tenderloin? Did Adachi support the Central Subway Transit Project extending a branch of the city’s subway to Chinatown—a boondoggle whose cost has spiraled out of control?

What almost no one mentioned, however, was the issue that prompted Adachi to run for mayor in the first place: pension reform. Adachi’s demand that city employees start paying more into their own pensions has not only defined him as a public figure but made him anathema to San Francisco’s political establishment—that is, the mayor, the Board of Supervisors (San Francisco is both a city and a county, so its board serves as city council), and the powerful public-sector unions.

“Pension reform is a tough issue,” Adachi tells me as we travel to the site of his next campaign appearance, a farmer’s market. “Unlike many other campaign issues, it’s hard to explain. It’s not ‘Save the Redwoods.’” Still, Adachi is largely responsible for having turned the issue of pension reform from a conservative talking point into a mainstream cause in liberal San Francisco. He is running as a “pragmatic progressive”—in fact, one of the most liberal candidates in the race. He argues that the underfunded pension obligations undertaken by irresponsible mayors risk not only bankrupting the city but also “crowding out” essential city services upon which middle-class citizens depend.

In San Francisco, a popular vacation destination, signs of that “crowding out” abound. The streets are filled with potholes that the city can’t afford to fix. Though the city earns much of its income from tourism, since 2010 it has imposed stiff fines for parking on the street during holidays, much to the concern of local businesses. For the second summer in a row, San Francisco has been unable to offer summer school to some 10,000 public school students because of a $1 million budget cut in the program. School budget cuts cause particular concern, since the city’s poorly rated school system is often cited as a major cause (along with a stagnant economy and high unemployment) of the flight of middle-class residents with children. Last year, the city’s parks budget was cut in half, while spending on services for seniors and those with AIDS was reduced by 30 percent. San Francisco taxpayers now spend one out of every six tax dollars on city employee benefits, Adachi says.

Though Adachi has been the city’s public defender for nine years, his devotion to pension reform makes him feel like a “consummate outsider.” “I’m the guy in the sci-fi movie who keeps yelling, ‘They’re coming, they’re coming,’” he jokes. But Adachi’s warnings about the city’s precarious finances and the “unsustainable” costs of unfunded pension liabilities have helped change the nature of the debate, analysts say. In late October, Governor Jerry Brown unveiled a 12-point proposal to limit the size of future pension liabilities. And thanks to Adachi, two competing pension-reform proposals will appear on Tuesday’s ballot: the one he drafted, Proposition D, which would save the city $1.7 billion in the next decade, he says; and Proposition C, a compromise measure supported by the current mayor, Ed Lee, the public-employee unions, and the rest of the city establishment. That might save as much as $1.4 billion over the same period, pension experts say.

“Win or lose,” says Corey D. Cook, an associate professor of political science at the University of San Francisco, “as a progressive candidate, Adachi can take credit for helping shift the ground of this debate. Pension reform is now very much in the air.” According to Cook’s latest polling for both the mayoral contest and the dueling pension-reform proposals, the odds seem to favor Lee, the first Chinese-American mayor in the history of a city whose population is about 30 percent Chinese. Widely regarded as a consensus candidate, Lee was appointed by then-mayor Gavin Newsom after he became California’s lieutenant governor ten months ago. Lee promised not to run for a new term, but he changed his mind and (having decided not to accept public money) has raised far more money for his campaign than any of the other candidates.

For this year’s election, San Francisco is inaugurating a complicated voting system that allows voters to rank their top three choices among the candidates. Oakland used this “ranked-choice” or “instant-runoff” system last year and got puzzling results, with the eventual victor, Jean Quan, not receiving the most first-place votes in the initial tally. In a column in the San Francisco Chronicle, kingmaker and former mayor Willie Brown (who, like most of the city’s political establishment, has endorsed Lee) says that the system has “thrown the whole town for a loop.” With 16 candidates “clamoring for attention” in a “town so disconnected,” Brown bets that half of the city’s 450,000 registered voters “give up in frustration.”

By any standard, Adachi, 52, is an unusual candidate. The great-grandson of Japanese immigrants who came to San Francisco in 1890, he was raised in Sacramento, where he attended public school. His parents and grandparents were interned for four years during World War II by the U.S. government at a camp in Arkansas. Given 24 hours to pack and leave their homes, his parents were not bitter, Adachi told me: “They never talked about it until I began asking questions.” That injustice undoubtedly helped shape his determination to defend the poor and vulnerable. In 2002, he ran for public defender—the San Francisco PD is the only elected one in California—against the city’s powerful political machine. Though outspent four to one, he scored an upset victory. But that wasn’t enough for a man who boasts about what the San Francisco Chronicle calls his “masochistic work ethic.” Adachi’s own friends describe him in similar terms: “relentless,” “super-intense,” a “micromanager,” a “dog with a bone.” Adachi lives comfortably, but by San Francisco standards not lavishly, in a $1.5 million house in upscale St. Francis Wood. His wife, Mutsuko, is a stay-at-home mom; their 11-year-old daughter attends private school. Somehow, Adachi found time to write two novels, and he lifts weights at 5 every morning.

Lean and fit, Adachi seems perpetually in motion. His foot never stops tapping as he tells me how pension reform became his cause. His interest began in 2009, when a civil grand jury report concluded that the cost to taxpayers of city-worker pensions would grow from $175 million to $700 million by 2018, crowding out welfare and other services. (That’s not even counting the unfunded pension liability—“bureaucratese for ‘the debt we’ll saddle our children with,’” Adachi says—which currently exceeds $3 billion.) More than a third of San Francisco’s nearly 30,000 city employees earned over $100,000, the report said, but many made little or no contribution toward their pensions.

Adachi succeeded in getting a pension-reform measure on the November 2010 ballot. Opposed furiously by most of the city’s unions, Proposition B went down to defeat, 57 percent to 43 percent. Adachi refused to give up. He revised the measure (weakening some key provisions, pension reformers complain), organized another petition drive, and put his watered-down Prop. D on this year’s ballot. Like the ill-fated Prop. B, the new measure would postpone the impending pension crunch by stopping pension “spiking,” limiting retirement benefits to 75 percent of salaries, and requiring city employees to contribute a greater percentage of their salaries to their pensions. Workers earning less than $50,000 would not be required to pay more than 7.5 percent, while those making over $200,000 could contribute as much as 16 percent in years when the pension fund was earning less than anticipated. Adachi’s plan would also prohibit pensions from topping $140,000 annually. (Former police chief Heather Fong, who retired two years ago at 53, got an annual pension of $264,000.)

To counter Adachi’s new plan, Mayor Lee and his union allies draftedProposition C, which, like Adachi’s plan, would require city employees to contribute 7.5 percent of their salaries to their pensions. And like Proposition D, it would also require them to pay more if the fund was performing poorly—but only up to 13.5 percent of their salaries. Steven Greenhut, an expert on the pension crisis who writes a weekly column in the San Francisco Examiner (and who contributes regularly to City Journal), calls Prop C. a “half-measure . . . designed mainly to take votes from Adachi’s real measure.” To Adachi’s dismay, Lee not only gave the police and firefighters’ unions a 4 percent compensation hike to offset the 3 percent increase in the pension contributions that they would have to make if Prop. C passed; the mayor also cut a deal with those unions to exempt them from Adachi’s Prop. D in case it passed. (Lee declined to be interviewed.) According to figures from the city controller’s office, uniformed police earned average annual wages and benefits last year of $166,607 per officer. Firefighters fared even better, earning an average total compensation of $178,732.

Adding insult to injury, the city’s controller, a Lee ally, skewed what was supposed to be an independent assessment of the rival measures to minimize the expected savings from Adachi’s Prop. D. Greenhut says that the controller used a ten-year timeframe to analyze the projected savings from Prop. D, rather than the customary 25-year timeframe, though the savings would increase dramatically in the later years because the reforms would apply mainly to new hires. It was such shenanigans that prompted Adachi to enter the race for mayor, which he did only hours before the filing deadline in August. “He had no money, no staff, no organization, nothing,” says Ryan Chan, Adachi’s 23-year-old campaign manager, who volunteered to help and wound up managing the fly-by-night operation. Adachi is thick-skinned: accused of being anti-union, a closet Tea Party Republican, and a Republican in progressive’s clothing, he ignores critics and plows ahead.

Still, the pension-reform proposals have thoughtful critics. Max Neiman, senior resident scholar at the Institute for Government Studies at UC Berkeley, recently suggested that the legality of both Propositions C and D would be challenged in court if passed. Both measures, argued Daniel Borenstein, a columnist for the Contra Costa Times, would place a disproportionate burden on the majority of city workers. These rank-and-file employees, he pointed out, would essentially subsidize the much better organized police and firefighters, who have far more lucrative plans and constitute 11,000 of the city’s 34,000 public-service employees. “There’s no reason that general workers, represented by a less-influential union, should have their rates dragged up by the spiraling cost of generous police and firefighter pensions,” Borensteinwrote. As Heather Knight observed in the Chronicle, the average pension for a retiree from the fire department was $108,552; from the police department, $95,016; from all other city agencies, $41,136.

Corey Cook thinks that prospects are poor for Adachi’s measure. “Mayor Lee’s proposition really took the air of the drive for deeper reform,” he says. “And one must ask whether having a consensus among the mayor, the unions, and the Board of Supervisors on the need for some reform isn’t better than the additional savings that Jeff Adachi’s measure would bring.” But Melissa Griffin, a reporter for theSan Francisco Examiner who has covered the mayoral race and the pension contest and anchored three of the mayoral debates, sees little indication that the gravity of the pension crisis has sunk in with city voters. Questions at the debates focused mostly on the shortage of affordable middle-class housing and the flight of middle-income families from San Francisco. “Folks appear to be more worried about their own ability to stay in San Francisco and less about services for the indigent,” Griffin wrote in the Examiner. “The theme this year is ‘Charity Begins at Home.’”

David Crane, a former adviser to Governor Arnold Schwarzenegger who has pressed for pension reform at the state level, thinks that neither Adachi’s nor Lee’s proposition goes far enough. “Neither revision covers existing public-sector workers, just future employees,” he says. Crane thinks that the municipal-pension crisis is far more severe than Americans realize: “Cities are broke; they have no cushion.” And when those cities are forced to make good on their pension promises, “services will cease and people will move. For cities, this is the Number One challenge.”

(Judith Miller is a contributing editor of City Journal, an adjunct fellow at the Manhattan Institute, and a FOX News contributor. This article was first published in City Journal.)

Filed Under: Top Stories Tagged With: California Politics, pension, reform

Legal Reform = Job Creation

November 10, 2011 By Tom Scott Leave a Comment

We all agree that the number one priority in this state and nation should be job creation. However, it seems like some people are more focused on spending money than saving money, at the expense of job creation.

A new study published by the U.S. Chamber Institute for Legal Reform called Creating Conditions for Economic Growth: The Role of the Legal Environment sheds some light on how the high cost of tort systems in the United States is raising the cost of doing business and hurting job creation. This study is based on a data set of state liability costs never before made available to public policy researchers, which provides an excellent basis for a reliable state-by-state comparison of costs.

I have often cited the Pacific Research Institute’s U.S. Tort Liability Study, which stated that just one tort reform in California would create 141,000 jobs. This study, looking at updated data, concludes the same thing: improvements in states with the costliest legal environments could increase employment between 1% and 2.8%. In California, that could mean more than a quarter million jobs.

Will this latest study simply be placed on a bookshelf with all the other studies and rankings or will someone (in the Legislature or Governor’s office) clue in and get it? We need to make legal reform part of California’s jobs package and thoroughly examine our regulations so we can get California back on track.

It is pretty clear that if we want people to invest or expand businesses in our state, we need to make the business climate more inviting. Right now, it is fair to say (and many CEOs agree) California’s business climate is among the worst in the nation. Legal and regulatory reform will create a positive business climate where investors will come and build.

Are you listening California? Legal reform = Jobs. Don’t just take my word for it – there are plenty of materials you can read to back it up.

(Tom Scott is the Executive Director for California Citizens Against Lawsuit Abuse. This article was first featured in Fox & Hounds.)

Filed Under: Top Stories Tagged With: California Politics, government spending, jobs, reform, regulations, unemployment

No Education without Representation: how special interests are robbing our students’ futures

November 8, 2011 By Brian Calle 2 Comments

The U.S. Education Department’s National Center for Educational Statistics on Tuesday released what it calls the Nation’s Report Card. The compilation of student test scores nationwide reflected a 1 percent improvement by fourth- and eighth-graders in mathematics but essentially no improvement in reading proficiency.

While the tiny improvement in math marks the highest scores in the history of the test, what makes the results troubling is that only 40 percent of fourth-graders and barely 35 percent of eighth-graders tested proficient in math and roughly one-third proficient in reading.

Shortly after the release of the Nation’s Report Card, Michelle Rhee, an education reformer and former head of the public schools in the District of Columbia, called me to discuss the state of education in the United States and what ought to be done to improve public schools. Rhee made headlines for her tough, data-driven approaches to education reform and battles against teachers unions in D.C. which eventually led to her resignation after unions spent significant resources to unseat Mayor Adrian Fenty, who hired Rhee. Rhee also was featured in the acclaimed education reform documentary “Waiting for ‘Superman.'”

(Read Full Story)

(Brian Calle is an Opinion Columnist and Blogger for the Orange County Register. His blog is called Uncommon Ground.)

Filed Under: Top Stories Tagged With: California Politics, education, reform, special interests, students

Pension initiative faces two tests: funding, courts

November 8, 2011 By Ed Mendel Leave a Comment

A pension reform group that filed two versions of an initiative yesterday faces two tests: raising $3 million to place the proposal on the November ballot next year, and a court battle over making current workers pay more for their pensions if the measure passes.

As public pension costs have risen while government services are being cut in a weak economy, the reform group has filed initiatives in the past, which failed to attract funding even though some polls have shown 70 percent support for pension reform.

This time the group, now led by Dan Pellissier, raised $250,000 for polling and legal experts before filing initiatives designed to withstand court challenges and quickly cut government pension costs, particularly important for some struggling cities.

He said the next step is to raise about $3 million, enough to pay for a drive to gather 1.3 million voter signatures and provide a cushion well above the minimum needed to place a state constitutional amendment on the ballot.

“Not today,” Pellissier said, when asked at a news conference if the group had the money. “But we have some commitments for future funding, and we have what we think is a good path in order to raise that amount of money.”

He said George Shultz, a former U.S. secretary of state in the Reagan administration, is a part of the campaign team and “has a tremendous amount of influence with major donors.”

In addition, Mike Genest, a finance director for former Republican Gov. Arnold Schwarzenegger, said he was “happy to be part of what’s become a pretty large coalition of people who have been trying for quite some time to make some progress on this issue.”

Aaron McLear, Schwarzenegger’s former press secretary, told the news conference fundraising should be aided by having agreement among reformers, who have not always been “on the same page,” and a firm proposal to show potential donors.

But some separation quickly emerged when Marcia Fritz, president of the California Foundation for Fiscal Responsibility, told the Sacramento Bee she was “not a part of this,” even though she was mentioned at the news conference.

The California Pension Reform group led by Pellissier is a spin-off from the foundation founded by the late former Assemblyman Keith Richman, R-Northridge. Pellissier, a former Richman aide, said the initiative is a Richman “legacy.”

A Fritz article in the Los Angeles Times yesterday urged legislators to find “common ground” for taxpayers and public employees “within the framework” of a pension reform proposed by Gov. Brown, some parts requiring voter approval.

Pellissier and Genest said the governor’s plan needs to be “more aggressive.” They were skeptical that Democratic legislative legislators and their union allies will agree to the governor’s plan, much less add more cuts in employer costs.

“It is possible, very unlikely, that the Legislature could pass something that would be strong enough to have our team decide that we would not move ahead with our proposal,” said Pellissier.

Brown’s proposal is designed to avoid a court challenge on a key issue: The widely held view that court rulings mean pensions promised state and local government employees on the date of hire can’t be cut without a new benefit of equal value.

The reform group’s plan is designed to withstand a court challenge because current workers could be required to “pay more for their same benefits and for a share of unfunded liabilities.”

In the reform group’s initiatives a curb on “spiking” (boosting pensions by cashing out unused sick leave, vacation time and other things to increase final pay) covers current workers, not just new hires as in the governor’s proposal.

Fritz’s article mentions a curb of one “abuse” that is in the governor’s plan but not in the reform’s group plan: a limit on “double-dipping” or the collection of a government pension and paycheck.

“We think there are some issues with folks who retire and their life circumstances change,” Pellissier said. “Their spouse dies and they have obligations they have to meet. We weren’t really comfortable weighing in heavily on double-dipping.”

Like the governor’s plan, the reform group’s initiatives have curbs on other abuses: retroactive benefit increases, the purchase of service credits or “air time” to boost pensions, and contribution “holidays” or reductions for employers and employees.

But the big difference is that the governor’s plan calls for “equal sharing” by employers and employees of the “normal” pension costs, what actuaries say is needed to pay for the current year.

That does not include the debt or “unfunded liability” that soared after the stock market crash and a weak economy dropped investment earnings well below the typical pension fund forecast, 7.75 percent, which critics say is too optimistic.

The governor’s budget last May estimated that the unfunded liability for the three state pension funds (CalPERS, CalSTRS and UC Retirement) was $121 billion over the next 30 years, not counting an additional $60 billion for retiree health.

A Stanford graduate student report last year, using a lower earning forecast of 4.1 percent, estimated that the unfunded liability for the three state retirement systems is about $500 billion.

The reform group’s initiatives address the unfunded liability by requiring equal “normal” cost contributions for employer and employees, except when the funding level of the system drops below 80 percent using federal private-sector pension standards.

Then government contributions to the normal cost would be limited to 6 percent of pay for most workers and 9 percent for police and firefighters. Employees would pick up the remainder of the normal cost until funding returns to 80 percent, potentially a significant increase over time.

Pellissier said employee contributions would be limited to an increase of 3 percent of pay a year. Current employees would have the option of switching to a lower-cost plan for new hires.

The original version of the initiative gives new hires a 401(k)-style plan. The alternative version would give new hires a “hybrid” similar to the governor’s proposal that combines a lower pension with a 401(k)-style plan and Social Security, if available.

Many public pension systems are below 80 percent funding now using government standards. Pellissier estimated that switching to private-sector standards could drop funding an additional 10 to 15 percent.

The reform group expects to pick one version of the initiative after they receive titles and summaries and an analysis by the Legislative Analyst, probably a week before Christmas.

Pellissier said the goal is to begin circulating petitions for signatures in early January. He said the signatures should be submitted by April 20 to ensure qualification for the November ballot.

(Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. This story was originally posted on Calpensions.)

Filed Under: Top Stories Tagged With: California Politics, pension, reform

The Union’s Occupation

November 7, 2011 By Ben Boychuk 5 Comments

Until recently, it’s been tough to pinpoint precisely where Occupy Los Angeles ends and public-employee union activism begins. For weeks, a large contingent of teachers’ union activists has mingled among the several hundred progressive malcontents encamped on the north lawn of Los Angeles City Hall. But the emergence of a new movement—“Occupy LAUSD”—will just about obliterate any distinctions between the two groups. Last week, 500 Los Angeles Unified School District teachers marched about a mile to demonstrate in front of their district’s headquarters. A few dozen hard-core activists joined them, camping out for five days before ending the “occupation” Saturday with a large union pep rally.

Truth is, parents and taxpayers—to say nothing of thousands of hard-working teachers—have plenty to gripe about. L.A. Unified is a picture of dysfunction, bureaucratic bloat, and massive waste. The second-largest school district in the United States, LAUSD has a $7 billion budget and enrolls (“educates” isn’t quite the word) around 600,000 students. The district is home to both the glistening, half-billion-dollar Robert F. Kennedy Community Schools complex, opened last year on the former site of the Ambassador Hotel (where Kennedy was assassinated in 1968), and Locke High School, one of the worst-performing high schools in California. Only 55 percent of LAUSD students graduate from high school after four years. The district is hindered, in large part, by its 350-page contract with United Teachers Los Angeles (UTLA), which enshrines seniority over quality and leaves younger, tatealented teachers most vulnerable to pink slips. Yet as Los Angeles education blogger Anthony Krinsky notes, despite three consecutive years of layoffs, “we have more teachers per student than we had 5 years ago, 10 years ago, 15 years ago, and 20 years ago.” For all of the manpower, student performance remains stagnant.

But the demonstrations at 4th Street and South Beaudry Avenue had little to do with those concerns. For Occupy LAUSD, all of the district’s problems could be solved with more money, more teachers, and less student testing. It’s no coincidence that the Occupy leaders were all top officials with the UTLA, which represents 40,000 LAUSD teachers, or that the marches and rallies preceded preliminary contract negotiations that had been scheduled for this week. What’s more, Occupy LAUSD got backing from the California Teachers Association (CTA), the California Federation of Teachers, and dozens of local teachers’ unions around the state. The CTA is the most powerful lobbying organization in Sacramento; it has spent more than $210 million in the past decade on lobbying, supporting liberal causes and Democratic candidates almost exclusively. The CTA’s state council recently authorized expending $8 million on next year’s elections, a number that’s likely to rise. (To be fair, however, new CTA president Dean Vogel wasn’t lying on Saturday when he counted himself among “the 99 percent.” With an annual salary of just under $290,000, Vogel is in merely the top 4 percent of American earners.)

Unlike the Occupy Wall Street protesters in Lower Manhattan, whose consensus-driven committees have offered an inchoate list of complaints and a hodgepodge of utopian remedies, Occupy LAUSD has issued demands easy to divine. They are precisely the same demands that UTLA has made for months, with derisive references to the rapacious “1 percent” tacked on to align the union’s public-relations campaign with the Occupy zeitgeist. Foremost among the demands is the union’s insistence that district officials use a $55 million budget surplus to rehire up to 1,200 teachers laid off in the past year. One teachers’ union activist—writing for the Socialist Worker, no less—summarized the larger goals of the occupation: “Tax the 1 percent to fully fund our schools; keep our schools public—by the 99 percent, for the 99 percent; and democratic community-based schools, not corporate Wall Street reform.”

District officials reacted to the union-led occupation with frustration and dismay. Superintendent John Deasy, a reliable liberal, professed his bewilderment at the protests in front of his office. “Occupy LAUSD is both misinformed and contrary to the spirit and intent of Occupy Wall Street, Occupy L.A., and the other laudable movements for economic justice that have sprung up around the country and the world over the last month,” Deasy said in a statement. “It is an insult for these protesters to equate a school district that during the past four years has experienced a $2 billion loss of dollars in state and federal funding, with policies and institutions that have systematically hurt the poor and middle class.” Deasy’s befuddlement may have been confounded further by Occupy LAUSD’s response. “It is hard for him to understand what the 99 percent movement is really about because he represents the worst of the 1 percent,” said Jose Lara, a board member of UTLA and chief spokesman for Occupy LAUSD.

For people like Lara, the “1 percent” consists of people such as Microsoft’s Bill Gates and Los Angeles real-estate mogul Eli Broad, both of whom support charter schools and contribute heavily to education-reform efforts. References to “keeping schools public” and rejecting “corporate Wall Street reform” are code for long-standing union opposition to school choice and suspicion of private philanthropy. Gates and Broad come up again and again in union talking points. “We reject the premise that the 1 percent billionaires—Bill Gates and Eli Broad—should be allowed to seize our public schools by buying seats on school boards that dismantle our schools, lay off thousands of teachers, and then award dozens of public schools to private charters, while denying teachers collective bargaining rights,” reads an October 22 UTLA press release outlining the themes of Saturday’s rally.

Beyond union rabble-rousing ahead of what’s sure to be a contentious contract negotiation, Occupy LAUSD highlights a stark and widening disagreement about what American public education should be. With their billion-dollar endowments, Gates and Broad are powerful players among an ideologically diverse coalition of reformers that includes conservative Republicans, Milton Friedman libertarians, and urban Democrats. But Gates and Broad are hardly the prime movers or the last word in education reform—a point that UTLA and its left-wing union allies refuse to concede. In general, reformers hold that public education should teach students how to be autonomous, knowledgeable, and self-governing citizens. The how and the wherematter less than the what. So reformers advocate empowering parents with a range of options, whether they’re charters or “virtual schools” or opportunity scholarships aimed primarily (but not exclusively) at lower-income families. Traditional public schools should compete with alternative models. Excellent teachers should be rewarded with higher pay. Bad teachers should be eased out of the system.

When Deasy took office this summer, he laid out a handful of proposed contract changes, including more school-site flexibility with hiring (thus curtailing the “dance of the lemons”), overhauling tenure rules, and experimenting with merit pay. Occupy LAUSD opposes every one of those ideas. For the occupiers, public education means tax-funded schools operated by union-organized administrators and teachers with little testing and accountability and no choice. Seen in that light, Occupy LAUSD is less radical than reactionary.

(Ben Boychuk is an associate editor of City Journal, where this article first appeared.)

Filed Under: Top Stories Tagged With: California Politics, government spending, pension, reform, unions

Why You Should Care about Pension Reform

November 6, 2011 By Joe Mathews 3 Comments

The current pension reform debate – with proposals from the governor and now from a team of Republicans via ballot initiative – is drawing considerable media attention.

It’s hard to understand why.

The debate has almost nothing to do with the broader public.

The pension changes being talked about won’t change all that much or save much money for other public programs. And the plans being offered don’t respond to the real problem in matters of retirement savings.

The problem? That the number of Americans participating in retirement plans is on the decline.

You read that right. I just finished reading a chilling new report from Michael Calabrese of the New America Foundation (full disclosure: I’m a New America fellow). His conclusion: “the majority of American adults do not participate in any retirement saving plan—whether pension or 401(k) or Individual Retirement Account (IRA). Participation in employer-sponsored plans peaked in the late 1970s and appears to be at its lowest level in more than 30 years.”

In that context, any debate about public pensions that doesn’t talk about the lack of retirement savings is missing the point. The question ought to be how do we increase retirement security for the broad majority of Americans – by getting them to save and participate in retirement plans. Because that’s the real unfunded obligation – those who don’t have retirement savings will have to rely more on Social Security or other forms of public assistance.

So if you want meaningful pension reform (meaningful enough for the public to care), a proposal must focus on ways to reshape public employee pensions not merely to save money but to provide some sort of basis for greater retirement savings by people who don’t work for the government.

And the California reforms on the table don’t meet either test. Both Brown’s plan and the initiatives filed this week would set up two-tiered pension systems – different for current and new employees. The savings in such systems are likely illusory because two-tiered pension systems are unstable (they end up becoming one tier again in good times) and because savings from new employees are likely to be minimal (especially in an era when there aren’t many new employees).

And yes, both Brown’s plan and the initiatives demand more in contributions from current employees. That’s good – but it’s not enough. If current employees are going to be asked to take hits – and they should be asked, and pressured to do so – they should be asked to move into defined benefit programs that are so safe and sustainable that other Californians and their employers outside the public sector could participate in them.

That kind of program would require not only more in contributions from employees (and from employers) but also much more conservative assumptions about investment returns.

That would mean less in pensions for public workers – but much, much more in retirement, and in retirement security for the rest of us.

For now, however, the pension reform debate remains one of those Sacramento conversations that has almost nothing to do with the lives of Californians.

(Joe Mathews is a Journalist and Irvine senior fellow at the New America Foundation, Fellow at the Center for Social Cohesion at Arizona State University and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (UC Press, 2010). This article was first published in Fox & Hounds.)