Wednesday, August 25, 2010

Reforming California's State and Local Pensions

Poster Boy for Pension and Salary Excess. The people of Bell, CA deserve to get their money back.

In a previous post, I thanked the U-T for forthrightly reporting that the root of the city's financial debacle is the granting of excessive pensions over the last decade. However, the most disturbing part of the article was this little paragraph:
For the most part, those changes affect new hires, with minor changes for the bulk of city employees and retirees whose promised benefits have strong legal standing to remain untouched. [emphasis added]
I don't know how the municipal pension law works in California specifically, but it needs to be change. In another post I looked at what was happening in Colorado and Minnesota where the states were being sued over changes in pension formulas. It appears to me that we need to amend the state constitution to allow pensions, even for current retirees to be reduced.

I think we should start work on an initiative that would modify the California constitution to allow cities and counties to reduce pension benefits of current employees as well as pensioners upon a vote of the people through a further initiative. Should a two-thirds protection apply? Perhaps, I wonder what you think. The constitutional amendment should be worded in a manner that invokes the sovereign immunity of the state of California to prevent suit in federal court. Without such a threat to enable city councils to negotiate reductions, we will be faced with the situation San Diego finds itself in:
In large part because of the 1996 and 2002 benefit increases, the city’s annual pension payment has grown.

In 2002, it was $54 million, or 7 percent of the operating budget.

Currently, the payment is $232 million, or 21 percent of the operating budget.

By 2025, it’s projected to be $512 million, or nearly 47 percent of the operating budget, if no changes are made to pensions or budgets.

Would that be legal? As a non-lawyer, it is hard for me to say. The concept of sovereign immunity would apply to California, so suit in federal court would not fly, especially if the changes were to the state constitution and specifically forbade suit in federal court. From wikipedia:

In Hans v. Louisiana, the Supreme Court of the United States held that the Eleventh Amendment re-affirms that states possess sovereign immunity and are therefore immune from being sued in federal court without their consent. In later cases, the Supreme Court has strengthened state sovereign immunity considerably. In Blatchford v. Native Village of Noatak, the court explained that

we have understood the Eleventh Amendment to stand not so much for what it says, but for the presupposition of our constitutional structure which it confirms: that the States entered the federal system with their sovereignty intact; that the judicial authority in Article III is limited by this sovereignty, and that a State will therefore not be subject to suit in federal court unless it has consented to suit, either expressly or in the "plan of the convention."
But what about the guarantee of a republican form of government and the prohibition against state abridging the privileges and immunities that citizens enjoy under the federal constitution under the fourteenth amendment? Under Article 1, Section 9, Congress is prohibited from passing any ex post facto law. Generally, the fourteenth amendment has only been applied to the bill of rights, but what about other sections of the constitution? And is a reduction of pension payments and ex post facto law, since it is a civil, not a criminal matter? I'm hoping Eugene Volokh can take this up.

I am open to suggestion as to how to get something like this going. I am not the organizing type. Tea party cause célèbre?


  1. Pension law blows. Once you promise these gold-plated packages, the only way out is bankruptcy.

    Let's file bankruptcy now and start over with a sound cost structure rather than trying to extend and pretend for another decade.

    Bankruptcy is a wonderfully liberating thing.

  2. WC,
    I have it on good authority, but can't remember where right now, due to a tad bit too much rum, that bankruptcy is no guarantee. For one thing, SD has too many assets it could sell to meet its obligations in the way of open parks, etc. I prefer examining the legal issues of whether the pensions are actually contracts.

  3. In yet one more failing of our current Governor, he was in the perfect time and place to use his bully pulpit to shame the CALPERS people back to the bargaining table to amend the pensions but chose not to.

  4. I sure wouldn't mind a lot of gov't owned parks being opened up for their traditional uses-- this includes renting out areas for range grazing-- and, for that matter, selling off some parks might be good....

    Of course, could also argue that parks don't belong to the state, they belong to the people and the state is just a care-taker.

  5. Robert Rizzo is a great poster boy. He has raised public awareness for publicc pensions like Dan Rather has done for B.S. reporting! I'm sending Rizzo some flowers to re-gift if he ends up in jail... hopefully.