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A Hedge-Fund Billionare From Texas is Waging War On California Pensions

The Arnold Foundation is clearly in the forefront of nationwide efforts to scale back pensions for state and municipal workers.

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The Sacramento meeting apparently helped set the stage for moves that are now occurring largely behind the scenes.

In an interview, Reed confirmed that he attended the pension summit and that he has been working on a statewide ballot initiative that would allow the state and local governments to reduce retirement benefits for current employees for the years of work they performed after his proposed reforms would go into effect. He says that such statewide reform is necessary for California’s fiscal health, to ensure that the state and local governments can provide a reasonable level of services to the public and to protect public employees.

“What we need to do statewide is make it possible for local governments to change future accruals for work not performed,” he says. He adds that his proposed ballot measure could be voted on as early as November, 2014.

Reed, a Democrat who has opposed  same-sex marriage and the  raising of the minimum wage of his city’s workers, seems to be what pension-cutters have in mind when they speak of their movement’s bipartisan makeup. (The gathering’s other politician, Carl DeMaio, is a Republican — and Reason Foundation senior fellow — who has advocated replacing San Diego city employees’ pensions with a 401(k)-type substitute.) Last year Reed pushed a ballot measure in San Jose to reduce that city’s retirement costs for its public employees. The measure passed, but is now tied up in the courts. He acknowledges that any such measure is likely to provoke an all-out fight with the state’s public-employee unions. Interviews with labor officials and their representatives seem to bear him out.

A ballot initiative to cut back pensions for existing employees would “change the constitution and would be a horrible thing,” says Steven Maviglio, a publisher of the California Majority Report and a Sacramento-based political consultant whose clients include Californians for Retirement Security, a labor coalition representing 1.5 million public employees and retirees.

Maviglio says that many employees have worked for years at jobs where they were promised certain benefits and that it would be a breach of faith to “throw out that understanding and break that trust. That’s the whole foundation of pension benefits.”

He adds, “If someone is teaching for 25 years and somebody changes the rules of the game, that’s hardly fair.”

Any statewide ballot measure campaign aimed at cutting back public employee benefits would provoke an expensive fight with unions. “It would cost tens of millions of dollars — $30 or $40 million,” Reed says. Fritz, president of the  California Foundation for Fiscal Responsibility (whose vice president is the CPPC’s Jack Dean), says that the backers would likely look for funding from the Arnold Foundation, among other sources.

The Arnold Foundation has funded similar efforts in the past. Two years ago, for example, the Center for Investigative Reporting revealed that the Arnold Foundation had given a $150,000 grant to Fritz’s group for a series of reports seeking to limit public employee pensions. Last year, another of the foundation’s checks made headlines when it was revealed that the Arnold Foundation was a  major backer of Engage Rhode Island, the group that pushed through that state’s pension overhaul law.

The Arnold Foundation is clearly in the forefront of nationwide efforts to scale back pensions for state and municipal workers. On  its website, the foundation identifies pension reform as one of its key initiatives, and it provides position papers supporting its stances.

“The current system has allowed politicians to promise one level of benefits without fully funding them,” the Arnold Foundation’s McGee told Frying Pan News in an email last week. “Across the U.S., state and local governments have underfunded workers’ benefits by at least $1 trillion.”

 
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