A Hedge-Fund Billionare From Texas is Waging War On California Pensions
Benjamin Gamboa doesn’t know John Arnold, but they are linked by a shared concern over the fate of public-employee pensions in California.
“I’m proud to have a pension,” the 30-year-old Gamboa says. “I believe every American should have a pension.”
The two men live in very different worlds. Gamboa is a research analyst at Crafton Hills College in Yucaipa, California. Arnold is a hedge-fund billionaire from Houston, Texas.
There’s another difference between them: Arnold recently had a representative present at a secret “pension summit” held at a Sacramento hotel, where strategies to limit public employee retirement benefits were discussed; Gamboa, a union member, did not – representatives of labor were specifically not invited.
“Pension reform” has become the latest battle cry in a seemingly endless war that has ostensibly been declared against tax-dollar waste, but whose single-minded purpose has been to slash the job protections and benefits enjoyed by California’s working middle class. Pension-cutting advocates have filled airwaves, websites and op-ed pages with stories about employees retiring in early middle age on six-figure pensions. The reality is that the average state and municipal worker retires on about $26,000 a year.
The Sacramento summit took place May 22 at the Citizen Hotel, a luxury boutique inn two blocks from the state capitol. It was hosted by the Reason Foundation, a Los Angeles-based conservative and libertarian public policy group that embraces privatizing government functions and cutting public employee pensions. The foundation’s most prominent trustee is billionaire businessman David Koch, a longtime advocate of reducing public sector retirement benefits.
The meeting’s agenda – a copy of which was obtained by Frying Pan News — was written in the terse, opaque prose of event planners, but still offers a glimpse into the group’s plans. Among other items, it lists an hour-long session on “Overcoming Opposition: Anticipating and Addressing Government and Union Opposition.” Perhaps the agenda was even more important for what it did not say: That the attack on public sector pensions may soon be transformed into a state ballot initiative that would change California’s constitution.
The participants in the closed-door meeting were Republicans and Democrats, and included public officials and representatives of numerous foundations and think tanks intent on reducing pensions for public employees.
Among those attending were San Jose Mayor Chuck Reed; former San Diego city councilman Carl DeMaio; Josh McGee, a vice president at the Laura and John Arnold Foundation; Marcia Fritz, president of the California Foundation for Fiscal Responsibility; Dan Pellissier, president of California Pension Reform; Ed Ring, executive director of the California Public Policy Center (CPPC) and editor of UnionWatch.org; Jack Dean, executive director at the Reason Foundation and editor of PensionTsunami.com, and Steven Greenhut, a journalist and author of the book Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.
Their gathering received no media coverage, with the exception of a brief mention in a column Greenhut wrote for the San Diego Union-Tribune. Despite the pension-cutting movement’s talk of the cause’s bipartisan pedigree, it seems to rely upon transfusions of money from wealthy rightwing personalities and nonprofits. Apart from the Reason Foundation’s close ties to David Koch, Greenhut’s own online hobby, CalWatchdog, is the creation of the Pacific Research Institute, a libertarian think tank with deep pockets.
Both the Reason Foundation and Pacific Research Institute are allied with the Koch-funded American Legislative Exchange Council (ALEC), which has been writing corporatist model legislation for about 30 years. More locally, however, the nexus for pension-cutting is the Tustin-headquartered California Public Policy Center, a conservative nonprofit led by Ed Ring, who worked to promote the anti-union Proposition 32 last year. CPPC’s advisors include Marcia Fritz and Jack Dean; its president is Mark W. Bucher who helped qualify and pass 2000’s Proposition 22, which effectively banned same-sex marriage in California. (Bucher is also a board member of Family Action, a rightwing Orange County political action committee.) Another CPPC board member, Robert Loewen, also serves as president of the ultraconservative Lincoln Club of Orange County.)
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 theCalifornia 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.”
The Arnold Foundation, McGee wrote, works with state and local communities to provide policy information and technical assistance to help them develop pension reforms. He said that a ballot initiative is just one tool to improve the retirement system, and added that the foundation “does not promote or fund ballot initiatives.” He also acknowledged that he attended the pension summit in Sacramento.
“We discussed the need to deal responsibly with accumulated pension debt, secure benefits that have already been earned, and create a system that is affordable, sustainable, and secure,” McGee stated.
Others believe the Arnold Foundation has its eye on California in order to promote public employee pension cutbacks across the nation. The foundation’s thinking, Maviglio says, is that “if liberal California can do it, it can happen anywhere.”
In many ways, Benjamin Gamboa, the 30-year-old research analyst at Crafton Hills College, is typical of those employees who find themselves in the pension-cutters’ crosshairs. Working at a community college, he believes, is serving the public good by helping students to reach their goals.
“I love what I do, and I love the security of my job,” he says. “My plan is to retire with a pension just large enough to spoil my grandkids.” He says that his hope and expectation will be for a pension of about $30,000 a year. “I want to enjoy the simple things,” he says. “There are no European vacations in my future.”
He adds that he is concerned to hear about the continuing efforts to limit his and other workers’ pensions.
“To attack the work I do and the security I treasure . . .” he says, then pauses. “It’s heart-wrenching. It’s demoralizing.”