Pension Reform – The San Jose Model

Pension reform in San Jose began in June 2012 when voters, by a margin of 69% to 31%, approved Measure B. Despite overwhelming support from voters, however, this vote triggered a cascade of union funded lawsuits which by 2015 had overturned several of the key provisions of the reform measure. Finally, in August 2015, the San Jose city council passed a compromise resolution that replaced Measure B with a scaled down reform; this was approved by voters in November 2016.

The provisions of this new pension reform measure should be of keen interest to local reformers everywhere in California, because they survived relentless attacks in court. While these reforms may not prove sufficient to completely solve the challenge to adequately fund pension benefits for city workers in San Jose, they are nonetheless significant. San Jose’s current unfunded pension liability now stands at just over $3.0 billion. These reforms are estimated to save $1.7 billion over the next ten years. Here are highlights:

HIGHLIGHTS OF SAN JOSE’S 2016 PENSION REFORM

1 –  Voter approval required from now on:
Any retirement benefit – including pensions and retirement healthcare – cannot be enhanced as the result of negotiations between the city council and union leadership, unless those enhancements are first approved by voters.

2 – New employees will be subject to a reformed package of retirement benefits:
Employees hired after the following dates (Police, 8/04/2013; Fire, 1/02/2015; Misc., 9/30/2012) shall be deemed “Tier II” employees, with the following retirement benefits:

  • Cost sharing: The city shall not pay more than 50% of the normal and unfunded payments due the pension system; this will be phased in by increasing the employee share of the unfunded payment at a rate of 0.33% of additional withholding of their pay per year.
  • Age of eligibility: Police and firefighters shall be eligible for retirement benefits at age 57; miscellaneous employees at age 62.
  • Cost of living adjustments: annual COLA increases to pensions shall be limited to the lessor of the CPI index or between 2.0% and 1.25%.
  • Pension eligible compensation: Final compensation for purposes of calculating the pension shall be based on the average of the final three years of work, and (with some exceptions for police and firefighters) be limited to base pay only.
  • Cap on pension benefit: Police and fire retiree pensions are capped at 80% of pension eligible salary, for miscellaneous employees the cap is 70% of pension eligible salary.

3 – “Disability” retirements awarded by independent panel.

4 – “Supplemental Payments” discontinued:
Prior to this reform, whenever investment returns in any given year exceeded the target percentage, supplemental payments were made to retirees. This practice took place even when the pension system was carrying a significant unfunded liability. This new provision even bars supplemental payments if the fund eventually exceeds 100% funding, in order to take into account the possibility that subsequent annual returns may again fall short of projections.

5 – Defined benefit retirement healthcare discontinued:
The defined benefit retiree healthcare plan is ended and instead a Voluntary Employee Beneficiary Association (VEBA) is established for new and current Tier 2 employees. The contribution rate will be 4% into the VEBA. Tier One employees can opt-in to the new VEBA, or keep their defined benefit healthcare plan with a contribution rate of 8% of payroll.

6 – Retirement contributions fixed:
Similar in intent to item #4, even if the pension system becomes more than 100% funded, there will be no lowering of the required employee contributions to the fund via payroll withholding – again, to take into account the possibility that subsequent annual returns may again fall short of projections.

7 – No retroactive benefits enhancements:
If retirement benefits are approved by voters, they are only to apply to work performed subsequent to the date of approval. If an employee transfers into a new job with the city that offers better retirement benefits than the job they vacated, these enhancements only apply to their work subsequent to their transfer.

PENSION REFORM – SAMPLE LANGUAGE

Section 1503-A. Reservation of Voter Authority.
(a) There shall be no enhancements to defined retirement benefits in effect as of January 1, 2017, without voter approval. A defined retirement benefit is any defined post-employment benefit program, including defined benefit pension plans and defined benefit retiree healthcare benefits. An enhancement is any change to defined retirement benefits, including any change to pension or retiree healthcare benefits or retirement formula that increases the total aggregate cost of the benefit in terms of normal cost and unfunded liability as determined by the Retirement Board’s actuary. This does not include other changes which do not directly modify specific defined retirement benefits, including but not limited to any medical plan design changes, subsequent compensation increases which may increase an employee’s final compensation, or any assumption changes as determined by the Retirement Board.

(b) If the State Legislature or the voters of the State of California enact a requirement of voter approval for the continuation of defined pension benefits, the voters of the City of San Jose hereby approve the continuation of the pension benefits in existence at the time of passage of the State measure including those established by this measure.

Section 1504-A. Retirement Benefits – Tier 2.
The Tier 2 retirement plan shall include the following benefits listed below. This retirement program shall be referred to as “Tier 2” and shall be effective for employees hired on or after the following dates except as otherwise provided in this section: (1) Sworn Police Officers: August 4, 2013; (2) Sworn Firefighters: January 2, 2015 and (3) Federated: September 30, 2012. Employees initially hired before the effective date of Tier 2 shall be Tier 1 employees, even if subsequently rehired. Employees who qualify as “classic” lateral employees under the Public Employees’ Pension Reform Act and are initially hired by the City of San Jose on or after January 1, 2013, are considered Tier 1 employees.

(a) Cost Sharing. The City’s cost for the Tier 2 defined benefit plan shall not exceed 50% of the total cost of the Tier 2 defined benefit plan (both normal cost and unfunded liabilities), except as provided herein. Normal cost shall always be split 50/50.In the event an unfunded liability is determined to exist, employees will contribute toward the unfunded liability in increasing increments of 0.33% per year, with the City paying the balance of the unfunded liability, until such time that the unfunded liability is shared 50/50 between the employer and employee.

(b) Age. The age of eligibility for service retirement shall be 57 for employees in the Police and Fire Retirement Plans and 62 for employees in the Federated Retirement System. Earlier Retirement may be permitted with a reduction in pension benefit by a factor of 7% per year for employees in the Police and Fire Retirement Plan and a reduction in pension benefit by a factor of 5% per year for employees in the Federated Retirement System. An employee is not eligible for a service retirement earlier than the age of 50 for employees in the Police and Fire Retirement Plan or age 55 for employees in the Federated Retirement System. Tier 2 employees shall be eligible for a service retirement after earning five years of retirement service credit.

(c) COLA. Cost of living adjustments, or COLA, shall be equal to the increase in the Consumer Price Index (CPI), defined as San Jose – San Francisco – Oakland U.S. Bureau of Labor Statistics index, CPI-Urban Consumers, December to December, with the following limitations:

1. For Police and Fire Retirement Plan members, cost of living adjustments applicable to the retirement allowance shall be the lesser of the Consumer Price Index (CPI), or 2.0%.

2. For Federated Retirement System members, cost of living adjustments applicable to the retirement allowance shall be the lesser of CPI or:
a. 1-10 total years of City service and hired after the effective date of the implementing ordinances of the revised Tier 2: 1.25%
b. 1-10 years total years of City service and hired before the effective date of the implementing ordinances of the revised Tier 2: 1.5%
c. 11-20 total years of City service: 1.5%
d. 21-25 total years of City service: 1.75%
e. 26 or more total years of City service: 2.0%

3. The first COLA adjustment will be prorated based on the number of months retired in the first calendar year of retirement.

(d) Final Compensation. “Final compensation” shall mean the average annual earned pay of the highest three consecutive years of service. Final compensation shall be base pay only, excluding premium pays or other additional compensation, except members of the Police and Fire Plan whose pay shall include the same premium pays as Tier 1 members.

(e) Maximum Allowance and Accrual Rate. For Police and Fire Plan members, service retirement benefits shall be capped at a maximum of 80% of final compensation for an employee who has 30 or more years of service at the accrual rate contained in the Alternative Pension Reform Settlement Framework approved by City Council on August 25, 2015. For Federated Retirement System members, service retirement benefits shall be capped at a maximum of 70% of final compensation for an employee who has 35 or more years of service at the accrual rate contained in the Alternative Pension Reform Settlement Framework approved by City Council on December 15, 2015, and January 12, 2016.

(f) Year of Service. An employee will be eligible for a full year of service credit upon reaching 2080 hours of regular time worked (including paid leave, but not including overtime).

Section 1505-A. Disability Retirements.

(a) The definition of “disability” shall be that as contained in the San Jose Municipal Code in Sections 3.36.900 and 3.28.1210 as of the date of this measure.

(b) Each plan member seeking a disability retirement shall have their disability determined by a panel of medical experts appointed by the Retirement Boards.

(c) The independent panel of medical experts will make their determination based upon majority vote, which may be appealed to an administrative law judge.

Section 1506-A. Supplemental Payments to Retirees.

The Supplemental Retiree Benefit Reserve (“SRBR”) has been discontinued, and the assets returned to the appropriate retirement trust fund. In the event assets are required to be retained in the SRBR, no supplemental payments shall be permitted from that fund without voter approval. The SRBR will be replaced with a Guaranteed Purchasing Power (GPP) benefit for all Tier 1 retirees. The GPP is intended to maintain the monthly allowance for Tier 1 retirees at 75% of purchasing power of their original pension benefit effective with the date of the retiree’s retirement. The GPP will apply in limited circumstances (for example, when inflation exceeds the COLA for Tier 1 retirees for an extended period of time). Any calculated benefit will be paid annually in February.

Section 1507-A. Retiree Healthcare.

The defined benefit retiree healthcare plan will be closed to new employees as defined by the San Jose Municipal Code in Chapter 3.36, Part 1 and Chapter 3.28, Part 1. Section 1508-A. Actuarial Soundness (for both pension and retiree healthcare plans).

(a) In recognition of the interests of the taxpayers and the responsibilities to the plan beneficiaries, all pension and retiree healthcare plans shall be operated in conformance with Article XVI, Section 17 of the California Constitution. This includes but is not limited to:

1. All plans and their trustees shall assure prompt delivery of benefits and related services to participants and their beneficiaries;

2. All plans shall be subject to an annual actuarial analysis that is publicly disclosed in order to assure the plan has sufficient assets;

3. All plan trustees shall discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system;

4. All plan trustees shall diversify the investments of the system so as to minimize the risk of loss and maximize the rate of return, unless under the circumstances it is not prudent to do so;

5. Determine contribution rates on a stated contribution policy, developed by the retirement system boards and;

6. When investing the assets of the plans, the objective of all plan trustees shall be to maximize the rate of return without undue risk of loss while having proper regard to the funding objectives of the plans and the volatility of the plans’ contributions as a percentage of payroll.

Section 1509-A. Retirement Contributions.

There shall be no offset to normal cost contribution rates in the event plan funding exceeds 100%. Both the City and employees shall always make the full annual required plan contributions as calculated by the Retirement Board actuaries which will be in compliance with applicable laws and will ensure the qualified status under the Internal Revenue Code.

Section 1510-A. No Retroactive Defined Retirement Benefit Enhancements.

(a) Any enhancement to a member’s defined retirement benefit adopted on or after January 1, 2017, shall apply only to service performed on or after the operative date of the enhancement and shall not be applied to any service performed prior to the operative date of the enhancement.

(b) If a change to a member’s retirement membership classification or a change in employment results in an enhancement in the retirement formula or defined retirement benefits applicable to that member, except as otherwise provided under the plans as of [effective date of ordinance], that enhancement shall apply only to service performed on or after the effective date of the change and shall not be applied to any service performed prior to the effective date of the change.

(c) “Operative date” would be the date that any resolution or ordinance implementing the enhancement to a member’s defined retirement formula or defined retirement benefit adopted by the City Council becomes effective.

REFERENCES

City of San Jose, “Alternative Pension Reform Act,” 2016 (full text)
http://sanjoseca.gov/DocumentCenter/View/59737

City of San Jose, Alternative Pension Reform Act Ballot Measure – references for voters, 2016
http://www.sanjoseca.gov/index.aspx?nid=3208

City of San Jose, Framework Agreement summarizing Alternative Pension Reform Act, 2015
http://www.sanjoseca.gov/DocumentCenter/View/46068

City of San Jose, “Sustainable Retirement Benefits and Compensation Act,” 2012 (full text)
http://www.sanjoseca.gov/DocumentCenter/View/5166

City of San Jose, Measure B (Sustainable Benefits and Compensation Act) – references for voters, 2012
http://www.sanjoseca.gov/index.aspx?NID=5187

Ballotpedia – San Jose Pension Modification Agreement, Measure F (November 2016)
https://ballotpedia.org/San_Jose,_California,_Pension_Modification_Agreement,_Measure_F_(November_2016)

Ballotpedia – San Jose Pension Reform, Measure B (June 2012)
https://ballotpedia.org/San_Jose_Pension_Reform,_Measure_B_(June_2012)

San Jose Mercury News, August 25, 2015 – San Jose council approves Measure B settlement
http://www.mercurynews.com/2015/08/25/san-jose-council-approves-measure-b-settlement/

Reforming Binding Arbitration

The City of San Jose was a pioneer in reforming their rules governing binding arbitration, rules that may seem obscure and complex to the uninitiated, but which have profound consequences. Until the San Jose city council put arbitration reform on the ballot in 2010, unelected arbitrators could end labor negotiations with decisions that were devastating the city’s finances.

In 2007, an outside arbitrator granted a pension increase to firefighters, extending a process of granting financially reckless concessions. Between 2000 and 2010, the city’s payments for retirement benefits tripled, while at the same time budget cuts forced a 20% reduction in overall city employees.

A 2009-2010 Santa Clara County Grand Jury report entitled “Cities Must Rein In Unsustainable Employee Costs,” concluded the arbitration process in San Jose “has resulted in wage and benefit decisions that have been greater than the growth in basic revenues sources.

For these reasons, in 2010 the San Jose City Council placed a measure onto the November ballot designed to reform the arbitration process. The measure, which voters approved by a margin of 66% to 34%, among other things, placed important limitations on what an arbitrator could do. Crucially, by reforming the arbitration process, it was no longer possible during negotiations for the unions representing city employees to coerce the city into accepting a bad deal because the arbitration process would likely result in an even worse deal. Here are highlights:

1 – If the two sides cannot agree on the neutral arbitrator, then either party may request the Santa Clara County Superior Court to appoint a retired Superior Court judge as the neutral arbitrator. Previously the third appointed arbitrator, the tie-breaker, would come from a from a list provided by the State of California Conciliation and Mediation Service.

2 – Arbitration hearings would be open to the public and documents submitted would be public records, unless provided otherwise by law.

3 – The city’s “ability to pay for employee compensation from on-going revenues without reducing City services” would become the primary factor that the Arbitration Board must consider when making a decision.

4 – Specific criteria was added to give weight to the obligation of an arbitration board to consider how their decision would impact the financial condition of the city. For example, the arbitration board could not approve a new deal that would:

  • increase the projected cost of compensation at a rate that is more than the 5-year average increase for sales tax, property tax, utility tax, and telephone tax,
  • retroactively increase or decrease compensation (other than base wages) for service already rendered,
  • create a new unfunded liability for the City, or,
  • interfere with the discretion of the Police or Fire chiefs to make operational or staffing decisions.

Critical to the success of San Jose’s arbitration reform was the support from a bipartisan coalition of city council members, lead by Mayor Chuck Reed, along with influential members of the community including the president of the San Jose Silicon Valley Chamber of Commerce, a local School District Superintendent, the president of the Santa Clara County Taxpayers Association, and small business owners.

ARBITRATION REFORM – SAMPLE LANGUAGE

EXHIBIT A TO RESOLUTION NO. ____
OF THE CITY OF SAN JOSE

That Section 1111 of the City Charter be amended to read as follows:

SECTION 1111. Compulsory Arbitration for Fire and Police Department Employee Disputes.

(a) It is hereby declared to be the policy of the City of San Jose that strikes by firefighting and peace officers are unlawful in the state of California and not in the public interest and should be prohibited, and that a method should be adopted for peacefully and equitably resolving disputes that might otherwise lead to such strikes.

If any firefighter or peace officer employed by the City of San Jose willfully engages in a strike against the City, said employee shall be dismissed from his or her employment and may not be reinstated or returned to City employment except as a new employee. No officer, board, council or commission shall have the power to grant amnesty to any employee charged with engaging in a strike against the City.

(b) The City, through its duly authorized representatives, shall negotiate in good faith with the recognized fire and police department employee organizations on all matters relating to the wages, hours, and other terms and conditions of City employment, including the establishment of procedures for the resolution of grievances submitted by either employee organization over the interpretation or application of any negotiated agreement including a provision for binding arbitration of those grievances. Unless and until agreement is reached through negotiations between the City and the recognized employee organization for the fire or police department or a determination is made through the arbitration procedure hereinafter provided, no existing benefit or condition of employment for the members of the fire department or police department bargaining unit shall be eliminated or changed.

(c) All disputes or controversies pertaining to wages, hours, or terms and conditions of employment which remain unresolved after good faith negotiations between the City and either the fire or police department employee organization shall be submitted to a three-member Board of Arbitrators upon the declaration of an impasse by the City or by the recognized employee organization involved in the dispute. All issues concerning the scope of the Arbitration Board’s authority, jurisdiction or powers shall, upon the request of either party, be resolved by petition to the Superior Court.

(d) Representatives designated by the City and representatives of the recognized employee organization involved in the dispute, controversy or grievance shall each select one arbitrator to the Board of Arbitrators within three (3) days after either party has notified the other, in writing, that it desires to proceed to arbitration. The third member of the Arbitration Board shall be selected by agreement between the two arbitrators selected by the City and the employee organization, and shall serve as the neutral arbitrator and Chairman of the Board. In the event that the arbitrators selected by the City and the employee organization cannot agree upon the selection of the third arbitrator within ten (10) days from the date that either party has notified the other that it has declared an impasse, then either party may request the Superior Court of the County of Santa Clara to appoint an arbitrator who shall be a retired judge of the Superior Court.

Any arbitration convened pursuant to this section shall be conducted in conformance with, subject to, and governed by Title 9 of Part 3 of the California Code of Civil Procedure to the extent that such procedures do not conflict with this Charter Section. Unless otherwise mandated by state or federal law, all arbitration hearings shall be open to the public and all documents submitted in arbitration shall be public records. Notwithstanding any other provision of this Charter to the contrary, the authority, jurisdiction and powers of the Board of Arbitrators are limited by the provisions of this Section.

(e) At the conclusion of the arbitration hearings, the Arbitration Board shall direct each of the parties to submit, within such time limit as the Board may establish, a last offer of settlement on each of the issues in dispute. The Arbitration Board shall decide each issue by majority vote by selecting whichever last offer of settlement on that issue it finds by the preponderance of the evidence submitted to the Arbitration Board satisfies section (f) below, is in the best interest and promotes the welfare of the public, and most nearly conforms with those factors traditionally taken into consideration in the determination of wages, hours, and other terms and conditions of public and private employment, including, but not limited to, changes in the average consumer price index for goods and services, the wages, hours, and other terms and conditions of employment of other employees performing similar services, and the financial condition of the City and its ability to meet the cost of the award.

(f) In all arbitration proceedings conducted pursuant to this section, the primary factors in decisions regarding compensation shall be the City’s financial condition and, in addition, its ability to pay for employee compensation from on-going revenues without reducing City services. No arbitration award may be issued unless a majority of the Arbitration Board determines, based upon a fair and thorough review of the City’s financial condition and a cost analysis of the parties’ last offers, that the City can meet the cost of the award from on-going revenues without reducing City services. The arbitrators shall also consider and give substantial weight to the rate of increase or decrease of compensation approved by the City Council for other bargaining units.

“Compensation” shall mean all costs to the City, whether new or ongoing, for salary paid and benefits provided to employees, including but not limited to wages, special pay, premium pay, incentive pay, pension, retiree medical coverage, employee medical and dental coverage, other insurance provided by the City, vacation, holidays, and other paid time off.

(g) Additionally, the Board of Arbitrators shall not render a decision, or issue an award, that:

1. increases the projected cost of compensation for the bargaining units at a rate that exceeds the rate of increase in revenues from the sales tax, property tax, utility tax and telephone tax averaged over the prior five fiscal years; or

2. retroactively increases or decreases compensation, including, but not limited to, enhancements to pension and retiree health benefit for service already rendered, but excluding base wages; or

3. creates a new or additional unfunded liability for which the City would be obligated to pay; or

4. deprives or interferes with the discretion of the Police Chief or Fire Chief to make managerial, operational or staffing decisions, rules, orders and policies in the interest of the effective and efficient provision of police and fire services to the public.

(h) Compliance with the provisions of this Section shall be mandatory and enforceable pursuant to section 1085 of the Code of Civil Procedure; failure to comply with these provisions shall also constitute an act in excess of jurisdiction.

(i) After reaching a decision, the Arbitration Board shall mail or otherwise deliver a true copy of its decision to the parties. The decision of the Arbitration Board shall not be publicly disclosed and shall not be binding until ten (10) days after it is delivered to the parties. During that ten-day period the parties may meet privately, attempt to resolve their differences, and by mutual agreement amend or modify any of the decisions of the Arbitration Board. At the conclusion of the ten-day period, which may be extended by mutual agreement between the parties, the decision of the Arbitration Board together with any amendments or modifications agreed to by the parties shall be publicly disclosed and shall be binding upon the parties. The City and the recognized employee organization shall take whatever action is necessary to carry out and effectuate the award.

(j) The expenses of any arbitration convened pursuant to this section, including the fee for the services of the Chairman of the Arbitration Board, shall be borne equally by the parties. All other expenses which the parties may incur individually are to be borne by the party incurring such expenses.

(k) This Section shall be effective immediately upon passage by the voters, and shall apply to any arbitration in which hearings commence after November 2, 2010.
Council Agenda: 8-3-10

(l) The voters declare that the provisions of this Section are not severable, and none would have been enacted without the others. Should any portion of this Section 1111 be enjoined or declared invalid, all provisions shall be deemed invalid and inoperative and there shall be no compulsory arbitration for fire and police department employee disputes.

REFERENCES

Ballotpedia – San Jose Repeal of Binding Arbitration, Measure V (November 2010)
https://ballotpedia.org/San_Jose_Repeal_of_Binding_Arbitration,_Measure_V_(November_2010)

City of San Jose (via Wayback Machine) – San Jose Repeal of Binding Arbitration, full text of original council resolution
https://web.archive.org/web/20120729115037/http://www.sanjoseca.gov/clerk/elections/2010Election/novembermeasures/arbitrators.pdf

City of San Jose (via Wayback Machine) – Informational summary of Ballot Measure V
https://web.archive.org/web/20161222144644/http://www3.sanjoseca.gov/pdf/BallotMeasureVFactSheet.pdf

City of San Jose (via Wayback Machine) – Impartial analysis of Measure V by City Attorney
https://web.archive.org/web/20101011225511/http://www.sanjoseca.gov:80/clerk/elections/2010Election/novembermeasures/caoiameasurev.pdf

California Policy Center – average pension for post 2000 retiree from San Jose police or fire is $130,000 per year (ref. Table 4-B)
http://californiapolicycenter.org/what-is-the-average-pension-for-a-retired-government-worker-in-california/

Pension Reform – The San Diego Model

Beginning around 2009 it became clear to civic leaders and councilmembers that the City of San Diego faced serious financial challenges. A San Diego County Grand Jury in that year released a report that recommended the city file for bankruptcy. The report cited the underfunded City’s pension system as the primary underlying cause of their budget deficits. By June 2009, the City of San Diego’s independent pension system was only 66.5% funded. By 2012, the systems unfunded liabilities were well over $200 million. Apart from bankruptcy, the only solution available to San Diego was pension benefit reform.

In June 2012, voters in the City of San Diego voted 66% to 34% to enact sweeping reforms to that city’s pension benefits. The coalition that promoted this reform included advocates for taxpayers, fiscal conservatives, and local business and trade associations that wanted to improve the financial health of the city. Since then, these reforms have been challenged repeatedly in court, but thus far the entirety of the pension reform package has been upheld. Here is a checklist of things to consider for local pension reformers in other cities and counties in California:

1 – The Reform Cannot Attack “Vested Rights”:

“Vested” benefits in California under current law require public employees to receive whatever benefits they were promised when they were hired. This means that even future benefits for existing employees cannot be changed. San Diego’s reform made certain to only affect future retirement benefits for new hires. San Diego’s reform also enacted a salary cap on existing employees, which did not violate vested rights. These two steps, putting new employees onto 401K plans that will not generate unfunded liabilities, and putting a cap on pension eligible salaries for existing employees, significantly reduced the amounts the City of San Diego has to contribute to their pension fund in order to keep it solvent.

2 – Rely on a Citizen’s Ballot Initiative:

Because most city councils and county boards of supervisors are populated by local elected officials whose campaigns are overwhelmingly funded by public employee unions, it is almost impossible to rely on them to enact pension reform. But a citizen’s initiative bypasses these beholden officials and relies on local activists and concerned citizens to research, write, qualify for the ballot, and campaign for meaningful reform.

3 – Prepare to Spend Between $5 and $10 per Signature to Qualify a Measure for the Ballot:

Or more! Signature gathering almost never can be 100% completed by volunteers, and professional firms are almost universally relied upon to make up the difference. In San Diego, supporters of the reform initiative spent about $1.1 million to gather 94,000 signatures – over $10 per signature.

4 – Expect Relentless Harassment From Public Unions:

One of the reasons it costs so much to obtain signatures is because the anti-initiative forces mount well organized opposition to signature gathering efforts. Tactics used in San Diego or elsewhere in California include (a) sending people to pace in front of the signature gatherer’s table, intimidating anyone who may want to sign the petition, (b) following signature gatherers home and photographing them in an attempt to intimidate them, (c) circulating flyers and sponsoring media campaigns that present misleading information – in San Diego the anti-initiative forces paid for a radio campaign that suggested people who signed petitions might have their identity stolen, (d) deliberately having people sign the petitions using fraudulent names in order to cause the entire body of petitions to be invalidated during the verification process.

5 – Be Prepared to Repeatedly Defend the Reform in Court:

San Diego’s reform was challenged before it went onto the ballot by opponents who argued it violated the “meet and confer” rule, wherein city officials have to talk with union representatives before changing conditions of their contract. This challenge first went to the Public Employee Relations Board, packed with gubernatorial appointees who are all former labor activists. PERB, predictably, upheld the opponents accusations, but in court the judge overruled PERB and permitted the initiative to stay on the ballot. The initiative survived other pre and post ballot legal challenges, but still faces one more round, sometime in either 2017 or early 2018, at the California Supreme Court.

What reformers did in San Diego succeeded because the language of the initiative minimized the potential for legal challenges, and it succeeded because there was a critical mass of committed reform minded activists, business associations, and politicians who were prepared to stay in the fight for years. Here is the language of San Diego’s Proposition B:

PENSION REFORM – SAMPLE LANGUAGE

BALLOT TITLE
Amendments to the San Diego City Charter Affecting Retirement Benefits

BALLOT SUMMARY
This measure would amend the San Diego City Charter to make changes to retirement benefits. The measure would:

From its effective date until June 30, 2018:

1. Limit a City worker’s base compensation used to calculate the employee’s pension benefits to Fiscal Year 2011 levels.

2. Require that any new job classification be created only after specific findings are made that the new classification “is necessary to achieve efficiencies and/or salary savings” by consolidating job duties or creating a more efficient service delivery method.

3. Define the terns the City must use when it begins negotiations with the City’s labor unions for their contracts, unless the City Council overrides those terms with a two-thirds vote.

Provide all new hires at the City, except for sworn police officers, with a defined contribution plan modeled after a 401 (k) plan in place of a defined benefit pension plan.

Provide contributions for employees participating in the new defined contribution plan, in order to compensate for the lack of Social Security provided to City workers. The City’s maximum contribution for general City employees would be 9.2 percent of ah employee’s salary; the maximum contribution for uniformed public safety officers would be 11 percent of their salaries.

Authorize the City Council to enroll police officers in either the defined benefit or the defined contribution plan. The maximum payment to a sworn police officer hired after the measure goes into effect, under the defined benefit pension plan, would be based on the officer’s highest three years of pay, and capped at 80 percent of the average of those years.

Eliminate the defined benefit pension plan prospectively for elected officials (Mayor, City Attorney and City Councilmembers).

Eliminate, to the extent allowed by law, pension benefits for City officers or employees convicted of a felony related to their employment, duties or obligations as a City officer or employee. This may be reversed if the conviction is overturned.

Eliminate, unless otherwise allowed by law or agreement, the requirement of a majority vote by employees or retirees in the retirement system for changes that affect their benefits.

Require the City to contribute annually to the defined benefit pension plan an amount substantially equal to that required of the employee for a normal retirement allowance, but not contribute in excess of that amount.

Provide disability benefits for defined contribution plan participants who have a work-related disability.

Require the Retirement System to submit an actuarial study to the Mayor and Council regarding the impact on the pension plan “of any increases in proposed compensation or benefits” in an initial Council proposal.

Require the City to annually publish the amounts paid to City retirees, but redact their names.

REFERENCES

Ballotpedia – San Diego Pension Reform Initiative, Proposition B (June 2012)
https://ballotpedia.org/San_Diego_Pension_Reform_Initiative,_Proposition_B_(June_2012)

Ballotpedia – Pension reform: San Jose and San Diego Voters Weigh in
https://ballotpedia.org/Pension_reform:_San_Jose_and_San_Diego_voters_weigh_in

City of San Diego – Text of 2012 Proposition B
https://www.sandiego.gov/sites/default/files/legacy/city-clerk/elections/city/pdf/retirementcharteramendment.pdf

San Diego Union-Tribune, April 11, 2017 – Appeals court vindicates San Diego’s 2012 pension cutbacks
http://www.sandiegouniontribune.com/news/politics/sd-me-pension-appeal-20170411-story.html

San Diego Union-Tribune, May 22, 2017 – [Union] Appeal says ruling that vindicated San Diego pension reform could create statewide problems
http://www.sandiegouniontribune.com/news/politics/sd-me-pension-appeal-20170522-story.html

KPBS San Diego, July 27, 2017 – San Diego Pension Reform Headed for California Supreme Court
http://www.kpbs.org/news/2017/jul/27/san-diego-pension-reform-prop-b-supreme-court/

Tips for Negotiating with Public Sector Unions

You’ve just been elected to the city council. You’re 34 years old and you’ve been attending your city council meetings for almost a decade. You’ve served on some civic improvement commissions. You’ve been a concerned activist for most of your life. But the firefighters union contract is being renegotiated this year, and you’re about to go behind closed doors and negotiate.

On the other side of the table are your respected friends who have protected your town for as long as you can remember. But their union is part of a national organization that wields tremendous financial and political power. And sitting across that table, alongside your friends who run the local fire department, are seasoned professionals who have been involved in labor negotiations for their entire careers. You are outgunned. What do you do?

This scenario has played out across California, especially in the smaller cities and counties and school districts. The elected officials charged with managing these smaller jurisdictions work part-time, for little or no pay. They negotiate with career professionals whose unions often are the largest single source for the campaign contributions that got them elected, or can get them defeated in the next election. The result of this situation is that government unions have a huge advantage in contract negotiations. For all practical purposes, they often run these smaller towns and school districts. What do you do?

Here are a few suggestions that can help make a difference:

1 – Use Outside Negotiators:

They will provide greater expertise in the subject matter, they will already know proven negotiation strategies, they will readily understand the contract language, and they offer a valuable independent, third-party perspective.

Of course it isn’t always necessary to hire an outside negotiator, it depends on the complexity of the negotiations and it depends on the financial impact of the contract. If it affects a large percentage of your budget, it makes more sense to hire an independent negotiator.

If you decide to hire an outside negotiator, you also have to be sure you are in compliance with existing codes and state law. Here is sample language to insert into a resolution to hire an outside negotiator:

OUTSIDE NEGOTIATOR – SAMPLE LANGUAGE

The use of an outside negotiator shall apply to all formal meet and confer processes undertaken pursuant to the Meyers-Milias-Brown Act, where either a recognized employee organization or the city, through their respective representatives propose 1) significant changes to contract terms, 2) extensions, or 3) when the employee association negotiates with third party negotiators or legal counsel.

In an effort to avoid inherent conflicts of interest, if an outside negotiator is deemed necessary, the principal representative negotiating on behalf of the city shall, 1) not be an employee of the city, 2) not be a member of any public pension plan under the city, and 3) have a demonstrated expertise in negotiating labor and employment agreements on behalf of municipalities. The city council shall designate one or more management level employees to be present during negotiations and to assist the principal negotiator as the city council and/or principal negotiator deem appropriate.

2 – Have an Independent Auditor Analyze the Fiscal Impact:

The first step is to get complete factual information in order to perform an economic analysis of the contract. Here are factors to consider:

Get an actuarial analysis: Preparing and providing an economic analysis of the short and long term costs of every term and condition of employment in the contract is the first way to ensure that 1) city council members have the best data available in front of them to negotiate and make a decision, and 2) the public has the appropriate data to vet the contract and the Council’s proceedings. If these negotiations affect pension benefits in any way, the economic analysis should include both the funded and unfunded actuarial liability that would or may ensue from adoption of the contract.

Use an independent auditor: This will allow city council members, staff, and the
public to benefit from the general level of confidence provided by a thorough and
reliable economic analysis by an external professional. Information from outside auditors should be used in conjunction with information from staff whenever practical.

Make sure the economic analysis includes tangible comparisons: The economic analysis of each term and condition of the contract can and should be viewed in the framework of how it will affect the citizens. Also, utilize tangible examples of comparisons with other programs. For instance, if a contract will cost the city X amount of dollars, contextualize it to show that X amount of dollars is equal to a specific city service or program.

Invest in staff training so they can also perform economic analysis: In addition to the use of an independent auditor, city human resources professionals need the proper resources and training to provide and analyze an economic analysis.

Provide for public review of the proposed new contract: The City should consider making the fiscal impacts of the contract available to the public and the City Council at least two (2) City Council meetings prior to consideration by the City Council of an initial meet and confer proposal.

INDEPENDENT AUDITOR – SAMPLE LANGUAGE

An independent auditor, a certified public accountant, or an actuarial accountant, shall prepare a study and supplemental data upon which the study is based, that identifies the fiscal impacts attributed to each term and condition of employment made available to the members of all recognized employee organizations.

The first analysis shall be of existing contract costs and of each thereafter.
The above report and findings of the independent auditor shall be completed and made available for review by the city council and the public at least two (2) City Council meetings before consideration by the city council of an initial meet and confer process.

The above report shall be regularly updated by the independent auditor to itemize the cost and the funded and unfunded actuarial liability which would or may result from adoption or acceptance of each meet and confer proposal. These measurements shall display the fiscal impacts of the employee association and or/city proposals. The report shall be prepared to include all benefit and pay aspects of each MOU, and shall include written council member acknowledgement that the report has been read and considered by the signing councilmember.

3 – Consider Transparent Discussion of Offers and Counteroffers

California’s current open meeting laws provide that a City Council can meet in closed session to provide its bargaining unit representatives with instructions and parameters for negotiation in the meet and confer process. Closed sessions allow City Councils to speak privately regarding their bargaining parameters without disclosing these parameters to labor representatives.

Additionally, the meet and confer process provides the opportunity for city representatives and labor representatives to bargain in good faith in order to reach an agreement on the proposed labor contract. Here are factors to consider:

Report the Facts: Transparency may result in more realistic counters or counteroffers. Broad dissemination of offers and counteroffers provides a progress report and clearer understanding for both the public and bargaining unit members.

Exercise discretion: Disclosure of offers and counteroffers may result in additional public posturing and increased politicization, which can affect negotiations. All parties involved in negotiations should use caution and clear communication when reporting out of closed session.

TRANSPARENCY – SAMPLE LANGUAGE

The city council shall report out the details of all formal offers that have been rejected at the time of the counteroffer rejecting each proposed term. City council labor negotiators shall have the duty to advise the city council during any closed session of all offers, counteroffers, information, and/or statements of position discussed by the labor negotiators taking place in the meet and confer process since the last such closed session.

4. Require Disclosures of Private Communications

Having city council members disclose communication contacts that were had with any labor representative is another way to bring transparency to the negotiation process and to build faith with the public. A careful value judgment can be made to what type of conversation is appropriate to report to the public. Factors to consider:

Disclose communications: While this principle may be contentious for some city council members, it can be viewed as a disclosure requirement, not a “no-deal” requirement. The communication that is disclosed may simply be that the conversation occurred.

Consider the impact on the process: There is some historical context that private meetings, without the disclosure of names, have been the environment needed to reach an agreement. However, a balance can be found to reconcile transparency with private communications. If a council member is going to meet with the employee group they should remember their closed session obligations and just listen. Council members that talk to employee groups outside of formal negotiations may undermine the negotiation process.

Preserve the ongoing relationship: All parties should approach the process in a respectful and sensitive way that will assist in building long-term working relationships that survive the sometimes difficult negotiation process.

DISCLOSURE – SAMPLE LANGUAGE

Each city council member shall disclose both publicly and during closed sessions, the identity of any and all employee association representatives with whom the city council member has had any verbal, written, electronic or other communication(s) regarding a subject matter of a pending meet and confer process.

5 – Allow Time for Public Comment

Disclosing the MOU and making it subject to more than one (1) city council meeting provides the opportunity for the public to effectively weigh in on the matter. Factors to consider:

MOU negotiations should have time for public comment consistent with other ordinances: 1st and 2nd readings at City Council meetings is standard practice for normal ordinances, and this seeks to put labor negotiations under that standard.

Be sure to get the timing right: Cities must remain in compliance with AB 537 (Chapter 785, Statutes of 2013)3 which requires that if a tentative agreement is reached by the authorized representative of a City and a recognized bargaining unit, the city council must vote to accept or reject that agreement within thirty (30) days of 1st consideration at a noticed public meeting.

PUBLIC COMMENT – SAMPLE LANGUAGE

Any agreed upon memorandum of understanding shall be introduced for first reading at a regular city council meeting and presented for approval at the next regular city council meeting in the same manner as a the first and second reading of an ordinance.

REFERENCES

To read Assembly Bill No. 537 (Chapter 785, Statutes of 2013) please click the following link:  http://www.leginfo.ca.gov/pub/13-14/bill/asm/ab_0501-0550/ab_537_bill_20131013_chaptered.htm

ACKNOWLEDGEMENTS

These suggestions were originally crafted by a committee of experienced local elected officials, city staff and thought leaders through a policy committee at the Association of California Cities -Orange County.

 

 

From well-funded pensions to basket case, San Francisco’s voters are to blame

It’s time for your community to create a municipal audit

The San Diego District Attorney last week charged John Collins with misuse of hundreds of thousands of dollars over several years as superintendent of Poway Unified School District.

The allegations would be shocking if they weren’t so common. In Placentia, Bell, Compton, Pasadena, Beaumont, and elsewhere, California cities have needlessly lost millions, and for a time, nobody knew. Accounting is boring. Until it isn’t. Just as the devil is in the details, the financial fate of public agencies is buried in the numbers.

Whether it’s via corruption or incompetence, without vigilant oversight, millions can be lost. Even in wealthy suburban cities with surplus funds, it’s still necessary to verify that internal controls are in place. In larger cities with limited funds and urgent needs for public services, it’s even more important. No matter what sort of city you live in, things can go terribly wrong.

If you’re a concerned citizen or an elected official charged with responsible management of your city’s finances, the annual audit can be extremely helpful. But instead of bringing in a CPA firm merely to verify the balances on your financial statements, you have an opportunity to do much more. Here are some ideas for getting the most out of your audit.

One recommendation, coming from Linda Lindholm, who served for fourteen years on the city council of Laguna Niguel and was mayor twice, is to change audit firms every five years. Let them know when they’re hired that it will be for a five year engagement. This policy helps ensure against the slight but very real possibility that an overly cozy relationship might develop between members of the city’s permanent staff, and the audit partners. A firm that is on a limited term of engagement will have far less motivation to smooth over bad news to keep the account.

Lindholm also recommended keeping an arms-length relationship with the auditors throughout the audit process. Once they’ve been given their instructions, as a matter of policy, council members should leave them alone until their report is completed. This prevents any elected official from attempting to influence the auditors.

So what more should a city have their auditors do, beyond just checking over the financial reports? To answer this we talked with several public accountants who have audited local agencies. Rich Kikuchi, a managing partner at LSA CPAs, makes the distinction between a “financial audit” and an “internal audit,” where the internal audit, or “watchdog audit,” represents this extra work. Other people we spoke with viewed this process as an extension of the normal audit. Some called it a “secondary audit.” Whatever it is called, here are a few of the specific things an elected official can instruct their auditors to add to their regular annual work:

  • Are funds being spent in compliance with the terms of the grants under which they were awarded?
  • Are what are the terms of capital improvement bonds, interest rate, payout timeline, use of funds?
  • Are there any irregularities in city investments?
  • Are the city’s employee payroll and benefits records consistent with what the city council authorized?
  • Are there always two signatures on all outgoing checks from the city?
  • Are all transfers in and out of the city’s bank accounts consistent with authorized city budgets?

Remember. Not boring. Millions of dollars of taxpayers money can be lost when questions like these aren’t proactively answered. In larger cities, hundreds of millions.

Depending on how much extra work auditors get assigned, the added costs to the CPA firm can add up. But often these additional fees are not significant when the work is performed at the same time as the auditors are on-site anyway to do their conventional audit. And of course if these auditors end up uncovering a significant problem in the course of this extra work, the savings realized by solving the problem could dwarf what it cost to get it discovered.

Another tip: When elected officials meet with the audit firm to identify and assign additional work, sometimes it makes sense to keep the additional assignments confidential. If a cover-up is occurring, there’s no benefit in announcing to staff where the extra scrutiny is going to fall.

California’s cities and counties face unprecedented financial challenges. The obvious one, mandatory payments to the pension systems that increase every year, is not going away. Other budget items that may have been neglected such as maintenance and upgrades of roads and other public works, eventually have to be faced, possibly at great cost. The last thing your city needs is to see money being wasted through misuse of funds. Especially when there is an annual opportunity to dig deep, expose the problem, and save that money.

References:

State Controller’s Office, Internal Control Guidelines for Local Agencies, 2015 (Betty Yee)
http://www.sco.ca.gov/Files-AUD/2015_internal_control_guidelines.pdf

“Watchdog Audit” Checklist – courtesy of LSA CPAs:

Public Safety
– Cash receipting/fee schedule
– Purchasing – ordering/receiving – approval
– Invoice approval
– Credit card use
– Budget monitoring
– Inventory control
– Fuel usage
– Fleet management
– Capital asset controls – purchasing/receiving/observation & inspection
– Payroll – timekeeping & review procedures
– Grant management (application, award, reporting, compliance, communication, G/L tracking)
– IT & systems analysis
– Revenue and expenditure accrual – period end reporting
– Cost allocations
– Customer complaints
– Other significant revenue sources

Community Development/Planning
– Inspections
– Permitting process and fee determination
– Revenue recognition & accounting for deposits
– Segregation of duties and supervision
– Use of City vehicles & fuel usage
– Cash receipting/fee schedule
– Purchasing – ordering/receiving/ – approval
– Invoice approval
– Credit card use
– Budget monitoring
– Capital asset controls – purchasing/receiving/observation & inspection
– Payroll – timekeeping & review procedures
– Grant management (application, award, reporting, compliance, communication, G/L tracking)
– IT & systems analysis
– Revenue and expenditure accrual — period end reporting
– Housing compliance and monitoring
– Review of any management companies used including controls, compliance, monitoring
– Child development program
– Cost allocations
– Customer complaints
– Other significant revenue sources

Parks & Recreation
– Cash receipting / fee schedule
– Revenue recognition & deposits accounting Class/event enrollment procedures
– Purchasing – ordering / receiving – approval Invoice approval
– Credit card use
– Credit card procedures & online payments Budget monitoring
– Inventory control
– Capital asset controls — purchasing/receiving/observation & inspection
– Payroll — timekeeping & review procedures
– Grant management (application, award, reporting, compliance, communication, G/L tracking) IT & systems analysis
– Revenue and expenditure accrual — period end reporting
– Use of City vehicles & fuel usage
– Cost allocations
– Customer complaints
– other significant revenue sources

Public Works
– Capital project controls
– Developer agreements
– Purchasing – ordering / receiving – approval
– Invoice approval Credit card use
– Budget monitoring
– Inventory control
– Land management
– Street management
– Cash flow
– Long-term expenditure planning and capital asset replacement/maintenance on major assets
– Fuel usage
– Fleet management
– Capital asset controls — purchasing/receiving/observation & inspection, fair value assessment/Developer contributed assets
– Payroll — timekeeping & review procedures
– Grant management (application, award, reporting, compliance, communication, G/L tracking)
– IT & systems analysis
– Revenue and expenditure accrual — period end reporting
– Segregation of duties and supervision
– Revenue recognition & accounting for deposits
– Cost allocations
– Customer complaints
– other significant revenue sources
– Debt compliance

Golf Course, Theatre (other enterprise activities managed by 3rd party)
– Management company compliance, report preparation & management fee verifications
– Fee schedule
– Cash receipting, revenue recognition (all revenue sources)
– Purchasing – ordering / receiving – approval
– Expenditure reporting
– Financial controls over accounting
– Cash & reconciliation procedures
– Financial period close & reporting
– Interim & monthly reporting
– Communication with the City
– City oversight
– Inventory control
– Capital asset controls — purchasing/receiving/observation & inspection
– Segregation of duties and supervision
– IT & systems analysis
– Credit card procedures
– City oversight
– Budget development and monitoring
– Debt/lease management
– Cost allocations Customer complaints
– other significant revenue sources

Water, Sewer, Electric Utilities
– If applicable -Management company compliance, report preparation & management fee
– Billing
– Fee schedule
– Capital project controls
– Long-term expenditure planning and capital asset replacement/maintenance on major assets
– Fuel usage
– Fleet management
– Capital asset controls — purchasing/receiving/observation & inspection, fair value assessment/Developer contributed assets
– Review of accounting operations
– Financial period close & reporting
– Interim & monthly reporting
– Communication with the City
– Inventory control
– Segregation of duties and supervision
– Budget development and monitoring
– Credit card procedures & online payments
– Credit card use
– Cash receipting, revenue recognition (all revenue sources)
– Cash receipting / fee schedule
– Purchasing – ordering / receiving – approval Invoice approval
– Fuel usage
– Fleet management
– Payroll — timekeeping & review procedures
– Grant management (application, award, reporting, compliance, communication, G/L tracking)
– IT & systems analysis
– Complex accounting — derivatives, swaps, futures, intangibles, etc.
– Cost allocations
– Customer complaints
– Debt compliance

Finance Department
– Payroll
– Purchasing / receiving
– Credit cards
– Travel
– IT & systems analysis — redundancy review
– Grant management
– Capital assets
– Inventories
– Journal entries
– Cash/transfers & bank account activity
– Wire transfers / EFT
– Debt management
– Long-term Cash flow & expenditure forecasting
– Cost allocations
– Customer complaints
– Billing for miscellaneous revenues
– Fraud management
– TOT/UUT/ business license/ other significant revenue sources
– Debt compliance

Governance
– Risk management
– Information & communication
– Credit card use
– Conflicts of interest
– Oversight of financial reporting & management override of controls Fraud hotline and Customer complaints

Transportation
– Management company compliance, report preparation & management fee verifications
– City oversight
– Communication with the City
– Cash receipting / fee schedule
– Purchasing – ordering / receiving – approval
– Invoice approval
– Credit card use
– Budget monitoring
– Inventory control
– Fuel usage
– Fleet management
– Capital asset controls — purchasing/receiving/observation & inspection
– Payroll — timekeeping & review procedures
– Grant management (application, award, reporting, compliance, communication, G/L tracking)
– IT & systems analysis
– Revenue and expenditure accrual — period end reporting
– Customer complaints
– other significant revenue sources

Internal service funds
– Allocation, classification
– Cost analysis

 

 

Propaganda posters in California public school classrooms: union dogma or educational opportunity?

In Search of Heroes

California is not just any “blue state.” By many measures, California is a blue nation. It boasts the world’s sixth largest economy, isolated from the rest of the nation by mountains and deserts that were virtually impassable before modern times. It is blessed with diverse industries, abundant natural resources, and the most attractive weather in North America. California is nearly a nation unto itself.

And it is an occupied nation. California is ruled by a coalition of monopolistic businesses, public sector unions, and the environmentalist lobby. These Occupiers control a Democratic super-majority in the state legislature, as well as nearly all of California’s major cities, counties and school boards. To enrich and empower themselves, the Occupiers have oppressed California’s dwindling middle class and small business sectors, and condemned millions more to poverty and dependence.

For the average working family, no state in America is harder to live in than California. It has the highest cost-of-living, the highest taxes, the most onerous regulations, one of the worst systems of public education, congested freeways and failing infrastructure.  It will take heroic efforts to turn this around. And heroic efforts require heroes.

In the face of this overwhelming power, this alliance of oligarchs and government bureaucrats that has conned voters into embracing their servitude, where do you begin? What steps can you take? How do you rescue education, cut taxes, encourage new homes and new infrastructure, and save small businesses from crippling regulations?

As it turns out, a lot has been done in select locales, where heroes stepped up and successfully fought for reforms. And if those reforms could be replicated in other cities and counties, things would begin to change. To borrow a quote from Winston Churchill, if small local reforms began to spread across this great state, it would “not be the beginning of the end, but it would be the end of the beginning.” Here are some examples:

(1) Turning failing schools into charter schools:

As recently reported by CPC general counsel Craig Alexander, in 2015 parents at the Palm Lane Elementary School of the Anaheim City School District turned in far more signatures than needed under the Parent Trigger Law. The goal of the law and the parents at Palm Lane was to convert a public school that had failed their children for over a decade into a charter school. But the district, as a pretext to denying the Parent’s Petitions, improperly disallowed many signatures. It took a few years for parent volunteers and pro-bono attorneys, all of them heroically volunteering their time, to fight in court. But on Friday, April 28, 2017, the Court of Appeals issued a 34-page opinion that upheld in full the trial court’s ruling in favor of the parents and against the Anaheim Elementary School District. The Appeals Court found the trial court’s initial ruling, including the court’s findings of the bad faith tactics of the district, was correct in all aspects. Palm Lane Elementary school will start the 2017-2018 school year as a charter school.

(2) Stopping secret negotiations between cities and counties and public sector unions:

It wasn’t easy, but a few years ago, heroic progress was made. Orange County, Costa Mesa, and Fullerton all adopted so called “COIN” ordinances. COIN stands for “civic openness in negotiations.” This prevented elected officials from approving sweetheart deals with the government unions whose campaign contributions got them elected, all behind closed doors with minimal opportunities for public review. And to explain what happened next, one may borrow a quote from Tolkien: “Sauron’s [the Occupiers] wrath will be terrible, his retribution swift.” California’s union-controlled legislature passed a law they termed “CRONEY” (Civic Reporting Openness in Negotiations Efficiency Act), which mandates government agencies with COIN ordinances make public all negotiations with private vendors involving contracts over $250,000. There’s no comparison, of course. Private vendors disclose proprietary cost information in negotiations, and public entities are already required to take multiple bids in a competitive process. By contrast, public sector compensation, benefits and work rules are by definition not proprietary, they are public. And public sector unions, regrettably, have no competitors.

(3) Reforming financially unsustainable pension benefits:

If someone told you that they were going to invest their money, but if that money didn’t earn enough interest, they were going to take your money to make up the difference, would you think that was fair? Of course not. But that’s how a couple of million unionized public sector workers are treating the rest of us. California’s annual pension costs have risen from 3% of all state and local government revenue (i.e., “taxes”) to nearly 10% today, and there is no end in sight. But heroes are out there. In June 2012 voters in San Diego and San Jose passed pension reform initiatives. In both cases, to borrow some Star Wars terminology, “The Empire [The Occupiers] Strikes Back.” After relentless attacks in court, San Diego’s reforms were left largely intact, and San Jose’s were severely undermined, although some important provisions were preserved.

The people who fought for these reforms are too numerous to mention. They are all heroes. Some of them, like San Jose mayor Chuck Reed, San Diego councilmember Carl DeMaio, Costa Mesa mayor Jim Righeimer, and California state senator Gloria Romero, were elected officials whose courage has earned them the permanent enmity of the Occupiers. Other heroes, far more numerous, were the citizens, parents, and activists who dedicated countless hours to these causes.

Turning California back into a place where ordinary citizens can afford homes and get quality public education is not going to be easy. But there is no chance unless heroic individuals band together and fight the Occupiers, one issue at a time, one city at a time, one school district at a time.

Over the next several months, the California Policy Center intends to find more examples of heroic local reforms. It is our intention to not only compile these stories, but for each of them, distill them to the essential steps that were taken, so that these winning formulas can serve as an example to others.

We are in search of heroes. Contact us. Tell us your story.

 *   *   *

Ed Ring can be reached at ed@calpolicycenter.org.

 

In policing and teaching, union rules protect workers at expense of public

NEAACP

Assembly Bill 119 Mandates Union Access to New Employee Orientation and Other Information for Public Employers