On April 10, 2015, the Reason
Foundation held their third annual Pension Summit. The Summit focused on a recent report by the Foundation which concluded the 2012 Public Employees' Pension Reform Act failed to fix California's pension problems. The keynote speaker for the event was former San Jose Mayor Chuck Reed. Reed presented his 2016 ballot initiative aimed at dismantling California pensions at the event. IAFF Local 522, along with other public employee organizations, picketed the event, letting Reed know his pension busting efforts are not welcome in Sacramento.
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| Pat Cook, in blue, Local 522 Secretary-Treasurer |
After a string of court losses
invalidating local governments' efforts to break their contractual obligations,
Reed seeks to undermine Californians' constitutional rights by
eliminating or altering the Contracts Clause in California’s Constitution. Currently, both the United States' Constitution and California’s Constitution include a Contracts Clause barring public entities from taking actions impairing contracts. The courts have construed the Contracts Clause as requiring the state, counties, and cities to provide promised pension benefits. In Allen v. City of Long Beach the California Supreme Court held an employee has a vested (i.e. contractual) right to receive the pension benefits his public employer promised him.
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| Mike Feyh, in green, Local 522 Director of Membership Services |
The Contracts Clause prevents public entities from walking away from all their contractual obligations, not just pension obligations. The Contracts Clause protects all Californians from legislation that impairs contracts with public entities, such as bond repayment obligations and commercial contracts. Without it, public entities would likely not even be able to borrow from the bond market, because financial institutions would not be able to rely on agencies' promises to repay their debts. While Reed's goal is to attack public employees' property rights in their pension, his efforts could undermine governments' contracts with private citizens, vendors, businesses, and lenders.
In recent years, California
courts have rejected local governments’ attempts to impair employees’ vested
benefits to address supposed “fiscal emergencies.” Our office vindicated both
the U.S. and California Contracts Clauses in several high profile court
battles: Stockton (fiscal emergency declaration does not authorize City to
renegotiate a closed labor contract), Los Angeles (fiscal emergency declaration
does not permit freezing retiree medical benefits or imposing furloughs),
Pacific Grove (Ballot measure capping PERS pension contributions unconstitutional). Similar rulings were obtained by the police
and fire unions in San Jose invalidating in substantial measure Reed’s San Jose
pension impairments.
To circumvent these
Constitutional protections, Reed's initiative would grant public entities Chapter 9 Bankruptcy type powers to unilaterally modify their contractual obligations, but without the creditor protections and judicial oversight of bankruptcy proceedings. Reed abandoned a similar
initiative on the ballot for the 2014 election after unsuccessfully suing
Attorney General Kamala Harris over the title and summary her office assigned
to it.
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| Chris Andrew, Local 522 City Vice President |
Reed’s initiative would modify
the Contracts Clause to allow public entities to impair their contractual obligations by majority vote of their governing body. Reed’s new initiative would likely accomplish this by repealing the California Contracts Clause altogether or singling out public employees for elimination of their Constitutional rights. Either
approach is repugnant. Excluding public employees’ contracts from the Contracts
Clause would allow governments to redirect money promised to public safety
employees for politicians' personal spending priorities (politicians rarely
return savings to the tax payers). Eliminating the Contracts Clause altogether would threaten everyone's contracts with the government.
Reed’s new initiative also
fails to account for the Contracts Clause of the U.S. Constitution which provides
the same protection against impairments of contract. Even if Reed succeeds in
altering the California Constitution, future attacks on vested pension benefits
will likely remain unconstitutional under the U.S. Constitution. California courts have held that the
California and United States Contracts Clauses are construed the same. (See for
example San Bernardino Public Employees Assn. v.
City of Fontana and
Kern v. City of Long Beach.) In the last 47 years, no court in the Ninth Circuit has
upheld a public agency’s attempt to impair its own contractual obligations. (See So. Cal. Gas Co. v. Santa Ana.) Thus, damaging the California Constitution
will not insulate Mr. Reed’s agenda from Constitutional protection.
Public employees are already working to expose Reed’s new initiative for what it is: an attempt to use the ballot box to accomplish what the courts already prohibited governments from doing. Keep an eye on this blog for continuing updates on Reed’s efforts to rewrite our Constitution.
