Labor unions feel pain of pension reform votes in San Diego, San Jose

The passage of pension reform measures in San Diego and San Jose signal the demise of labor union power, more so than Scott Walker's win in Wisconsin. Photo: T.J. Zane/Lincoln Club of San Diego County

SAN DIEGO, June 7, 2012 Hear those alarm clocks ringing from the West Coast? It’s a big wake-up call for America’s public labor unions, and they better not hit the snooze button.

While the nation focused on Wisconsin Governor Scott Walker’s victory, the passage of two pension reform measures in the cities of San Jose and San Diego is likely to embolden other fiscal conservatives and taxpayer advocates across the country, triggering a revolution of reform.

Voters overwhelmingly approved initiatives that overhauled retirement benefits for city employees in an effort to get overwhelming pension obligations under control. In San Diego, a super majority two-thirds of all voters approved Proposition B; that number was 70 percent in favor of the similarly named Measure B in San Jose.

“San Diego’s victory isn’t just a win for San Diego taxpayers. It marks the beginning of the pension reform movement for our country,” declared Lani Lutar, president and CEO of the San Diego County Taxpayers Association. “Tuesday the voters sent a very clear message to elected officials: Put the taxpayers first. Use our money prudently, and stop giving away benefits we can’t afford.”

Lutar and SDCTA were among the leaders of a coalition including the pro-business Lincoln Club of San Diego County, San Diego Association of Realtors, California Restaurant Association, Mayor Jerry Sanders, City Council President Pro-Tem Kevin Faulconer, and City Councilman Carl DeMaio, who also won the mayoral primary election based in no small part on his backing of pension reform.

Pension reform architects Councilman Kevin Faulconer, Mayor Jerry Sanders, Lincoln Club of San Diego County President and campaign chairman T.J. Zane, and San Diego County Taxpayers Association President and CEO Lani Lutar celebrate the passage of Proposition B, San Diego’s pension reform initiative. Photo: Melissa Jacobs.

Voters sent the message loud and clear they were sick and tired of seeing civil servants get better retirement deals than anything available in the private sector, often retiring with higher salaries from pensions than when they were working. They were enraged when they found out about “pension spiking,” ways public employees could artificially increase their final salaries and therefore game the system to boost their pensions. Meanwhile, critical services such as filling potholes and keeping libraries and parks open were being cut to the bone in order to afford the pension payouts.

In San Diego, the example of a retired city librarian making $227,000 annually from her pension after being paid a top salary of $154,000 while working hit home with voters in this military community, who learned that her pension topped that of a four-star general.

Public labor unions were expected to leverage all of their resources into fighting the measures, but in the end they were outspent in both San Diego and San Jose. It seemed in retrospect that a last-minute barrage of advertising never came, and the unions gave up without much of a fight. 

Pension reform advocates call it a crushing defeat, a rising trend, and just the beginning. According to the California Foundation for Fiscal Responsibility, with the victories on Tuesday 18 of 20 pension reform measures have now passed in California since 2010. They have won with an average of two-thirds of the vote, even in more liberal cities like San Francisco.

But there is no doubt the fight will move from the polls to the courts, with legal challenges promised by the public employee unions in both cities.

The measures both address pensions for current employees as well as new hires, but are slightly different. San Diego will now freeze the base pay used for pension calculations over the next six years, eliminate pension spiking, and put all new hires except for police officers into 401-k type retirement plans. It is estimated that the plan would save the city nearly $1 billion over 30 years.

Under San Jose’s measure, current workers have to pay up to 16 percent of their salaries to keep their retirement plan or accept more modest benefits. New hires would get less generous benefits.

San Jose Mayor Chuck Reed says he expects other cities to follow San Jose’s lead. “It’s novel but it’s certainly not radical,” he said. “Mayors across the country are very interested. We’re at the leading edge but we’re not alone.”

John Nienstedt, President of Competitive Edge Research and Communication in San Diego, agrees with Reed, saying the votes in San Diego and San Jose are just the beginning. “Ballot box pension reform is here to stay. In both San Jose and San Diego, ‘yes’ votes came from independent voters, and even 40% of Democrats supported the measures. That across-the-board support makes pension reform a bonafide movement.”

“The voters get it, they understand what needs to be done,” said Reed, a Democrat who has called pension reform his highest priority.

San Diego’s payments to the city’s retirement fund soared from $43 million in 1999 to $231.2 million this year, equal to 20 percent of the city’s general fund budget which pays for day-to-day operations. Meanwhile, services were cut back. For a while, some fire stations had to share engines and trucks. The city has cut its workforce 14 percent to 10,100 employees since 2005.

San Jose’s pension payments jumped from $73 million in 2001 to $245 million this year, equal to 27 percent of its general fund budget. Four new libraries and a police station have never opened because the city cannot afford to operate them. The city cut its workforce 27 percent to 5,400 over the last 10 years.

Add to the mix a second blow to labor unions in San Diego. Proposition A prohibits San Diego from requiring “project labor agreements” that force the city to accept prevailing union wages and health care coverage on municipal construction contracts. This will open up competitive bidding and save the city millions. Prop A passed by nearly as great a margin than Prop B in San Diego, making it the largest city to pass a fair and open competition measure to date.

Coupled with the defeat in Wisconsin, legislators and voters now realize labor unions no longer control the outcome of elections through their numbers and their treasuries, and they are freed from their grip to take action. As membership drops year after year in the U.S., unions find themselves in the unaccustomed position of being forced to come to the table and compromise on salary, benefit and pension cutbacks or risk far greater losses at the hands of the voters. 

The practical effects are bad enough. But the psychological and emotional blow must be painful for a movement used to doing the dictating, not being dictated to.

But the simple truth is that the unions know deep down that funding for their lavish benefits is running out. Public employees are being handed pink slips. Reduced benefits are better than none at all thanks to being unemployed. It’s now up to members to talk some sense into their leaders and decide what concessions they can live with. Otherwise, the ship of state will sink and they will all go down with it together.

Asking public employees to contribute toward their own retirement, pay part of their health care costs, and stop the pension spiking games seems more than fair to people working in the private sector, many of whom would line up by the hundreds for the chance to take a public sector job. So if public employees don’t like what’s happening, voters in San Diego, San Jose, and soon in many other cities across America have a response for you: Don’t let the door hit you on the way out.


Gayle Lynn Falkenthal, APR, is President/Owner of the Falcon Valley Group in San Diego, California. Read more Media Migraine in the Communities at The Washington Times. Follow Gayle on Facebook and on Twitter @PRProSanDiego.


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Copyright © 2012 by Falcon Valley Group

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Gayle Falkenthal

Gayle Lynn Falkenthal, MS, APR, is President of the Falcon Valley Group, a San Diego based communications consulting firm. Falkenthal is a veteran award winning broadcast and print journalist, editor, producer, talk host and commentator. She is an instructor at National University in San Diego, and previously taught in the School of Journalism & Media Studies at San Diego State University.


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