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CA mayors want voters to let cities cut public pensions

San Bernardino Mayor Pat Morris is one of several California mayors who signed a proposed ballot measure to let cities cut current employees pensions.
San Bernardino Mayor Pat Morris is one of several California mayors who signed a proposed ballot measure to let cities cut current employees pensions.
Sharon McNary/KPCC

A group of mayors who want to let cities cut current and future public employee pensions have filed to put a measure on California's statewide November, 2014 ballot.

San Bernardino Mayor Patrick Morris was among those who signed the measure. His city sought bankruptcy protection more than a year ago in order to reorganize millions of dollars in pension and other debt. Other area mayors adding their names to the Pension Reform Act of 2014 were Anaheim's Tom Tait and Santa Ana's Miguel Pulido. San Jose Mayor Chuck Reed also signed.

To get their measure before voters,  the mayors would have to mount an expensive initiative signature-gathering campaign, or persuade the Legislature to put it on the ballot.

Government watchers such as the California Little Hoover Commission and the U.S. Government  Accountability Office have long warned that local governments have been making pension promises to employees that they cannot keep. But pension reform at the local level can be a divisive issue, often pitting current workers against future employees.

The California Legislature last year passed a law to reduce the retirement benefits of future state employees, but it left current workers' benefits untouched.

This week, four Long Beach unions came to terms with city management to reduce the retirement benefits of future workers, and to have current and future employees put more of their own pay into their retirement funds.  All the unions representing workers in Long Beach will have two tiers of benefits, with new employees receiving less than current workers.

The Little Hoover Commission in 2011 said public employee pension programs were dangerously underfunded, and it concluded that pension debt was a primary driver of Stockton and San Bernardino into bankruptcy.

Stanford researchers estimated in 2010 that the three biggest pension funds in California (CalPers, CalStrs and UCRS), which manage retirement money for 2.6 million teachers, public employees and university workers, could face a $500 billion shortfall in obligations. They said governments were low-balling how much they owed because they were overestimating what their investments would earn.

Underfunded pension obligations are getting more attention in the financial world. In April the credit rating firm Moody's changed how it calculates the risks of investing in cities' bonds, placing more emphasis on pension burdens. A lower rating means it's more expensive for cities to borrow money. Moody's later issued a list of 30 California cities whose bonds were under review for a potential downgrade, an analysis that was partially based on the risk that cities had promised more in pensions than they could pay.

Those cities include Azusa, Downey, Santa Monica, Glendale, Huntington Beach, Inglewood, Long Beach, Palmdale, Rancho Mirage, Redondo Beach, Santa Ana and Torrance.

Pension Reform Act of 2014, filed with California Secretary of State office 10/15/2013