Volume I, No. 11

January 29, 2009

Public Employee Pension Contracts Initiative

By David Walrath -- dwalrath@m-w-h.com

The Attorney General and Secretary of State have cleared a new initiative for circulation.  The initiative relates to labor relations and specifically to renegotiation of public employee pension contracts.  The initiative has until July 22, 2009 for the proponent to submit the required number of petition signatures.  After the proponent files the petition signatures, there is a counting process and then a process to determine whether or not they are valid signatures.  That process could continue until October 19, 2009. 

The initiative has the following as its first finding by the proponent:

“Past promises made to public employees for future pension entitlements were excessive at the time made and were based upon undue influence by means of campaign contributions paid to the public officials who made the promises for the pensions.  The public believes that there was no meeting of the minds between taxpayers and the public employees and therefore no contractual obligation obtained.”

This finding clearly states the initiative’s direction.  The initiative would amend California Constitution Article 1, Section 9 to allow a benefit renegotiation, including reducing vested benefits for existing and prospective retirees.  The initiative would apply to all state and local governments and taxing special districts. The authority to renegotiate is very broad; however, it might not include benefits from the State Teachers’ Retirement System (STRS).  While STRS is a part of state government and while educators are part of specific school districts, community colleges and county offices of education, the initiative is for renegotiating.  Currently, there is no negotiation process for the school districts, community colleges and county offices of education for benefits from STRS. Instead, STRS has a series of benefits that are applicable to all employees regardless of the employing agency.  For this reason, the initiative could be interpreted to exclude the benefits provided by STRS.

Even if the STRS benefits were excluded, retiree health benefits and other retiree benefits would not be excluded from the provision of this initiative, if it were to pass. School districts and their exclusive bargaining representatives could bargain changes in vested benefits for individuals, retired or to be retired, on health care benefits or other benefits.  This would put in jeopardy those vested benefits that have already been negotiated by employees for their health care security and retirement.

The initiative appears to have a much broader effect on state, city and county employees, as well as special district employees.  These entities would have a more significant issue because it appears that if they are contracting agencies with the Public Employees’ Retirement System (PERS), then they could fully and totally renegotiate current benefits if the agency and the bargaining unit were able to reach an agreement.

While the proponent will be attempting to gather signatures and will be using the internet, as well as other methods to gather signatures, the requirement of at least 694,354 valid signatures is a daunting goal for an initiative without significant financial backing.  Historically, initiatives have cost between $1 million and $3 million to qualify.  If the proponents are unable to acquire sufficient free signatures they may or may not have sufficient resources to acquire paid signatures.  It is too early at this time to determine whether the proponent will or will not be successful in placing the initiative on the ballot.  If it were to be placed on the ballot, the current recipients of PERS, University of California retirement system – the 1937 Act county retirement systems, STRS, and other public retirement systems undoubtedly will band together to wage an aggressive campaign to defeat the initiative.  If there were to be a special election called for ballot propositions, this initiative could qualify for that special election if it were to meet the signature gathering totals in the time required under the Constitution.