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BY JON MILTIMORE – In what was a hard day for public sector unions, voters in several states passed measures to curb public pension costs. Several key initiatives supported by labor also went down Tuesday.
A series of pension measures and ballot initiatives went against public sector workers Tuesday in what proved to be a tough day for labor.
In California, voters in seven cities — San Jose, Redding, Riverside, Menlo Park, Bakersfield, Carlsbad and Pacific Grove — approved measures seeking to reduce public pension costs, and a half-cent sales tax in San Diego that would have prevented public safety cuts also was rejected.
Public safety unions in each municipality opposed the reforms, but efforts to defeat the measures failed in what was a big night for pension reform advocates.
“It was almost a complete annihilation of the opposition,” said Marcia Fritz, California for Pension Reform President.
Representatives from the American Federation of State, County and Municipal Employees in California and the San Jose Police Officers Association did not return messages seeking comment Thursday.
Across the country, voters in more than 40 Chicago suburbs voted “yes” on a measure to pressure the legislature to reduce pension benefits for future public employee hires.
The votes in Illinois and California could be a sign of hardening public opposition against public pensions.
Defined public benefit plans have fallen under scrutiny in recent years and now stand at least $3.6 trillion underfunded, according to some academic estimates, largely because of optimistic earnings assumptions, the stock market crash and chronic under funding of systems.
While unions have been open to some benefit reductions for new workers, leaders have signaled they will continue to oppose efforts to transition public workers into defined contribution plans, such as the 401-(k) program popular in the private sector.
“Too many employers have replaced the system of pensions we used to have with underfunded savings accounts,” AFL-CIO President Richard Trumka told a gather at the National Press Club earlier this year. “Today, the median balance in 401K accounts is only $27,000 – nowhere near enough to fund a secure retirement.”
On Tuesday, gubernatorial candidates in six states — Alabama, Nevada, Pennsylvania, Rhode Island, Tennessee and Wisconsin — who’ve expressed support for 401-(k) style plans in one form or another were victorious.
Fritz, a CPA who helped coordinate initiative efforts in California, said she believes California Governor-elect Jerry Brown is also serious about stabilizing pensions.
“His proposals are very good. You can tell he gets it,” she said.
Fritz said she will continue working with other municipalities on pension reform, something that will pit her once again against public safety unions, which account for about two-thirds of CALPERS unfunded liability.
“We want to build on the momentum of these local elections and not lose it,” she said.
The sole union pension victory on Tuesday came in the labor stronghold of San Francisco, where voters rejected by 25,000 votes a proposal that would have increased employee contributions to pensions and changed arbitration rules.
“We were outspent 10-1 there,” said Fritz, “And even there we had a fairly respectable showing.”
Around the country, key union-backed ballot initiatives also fell despite heavy donations from public sector unions.
A tax on high-income earners fell short in Washington despite $3.4 million in campaign contributions from public sector unions.
In Oklahoma, an initiative to raise teacher pay failed to garner 20 percent of the vote, despite $1.8 million in campaign contributions from the National Education Association that allowed supporters to outspend their opponents by a 3-1 margin.
The largest initiative failure came in California, where unions supported campaigns to return redistricting authority to the state legislature and rescind a series of tax-breaks for large businesses. Public sector unions supported the initiatives with $16.1million in campaign spending, but both measures failed by large margins.
Labor’s largest victory of the night probably came in Massachusetts, where public sector unions spent $4.6 million to defeat a cut in the sales tax that would have cost the state about $2.5 billion annually.
Over the entire election cycle, unions spent more than $200 million, according to the Sunlight Foundation, but that amount could be small compared to what unions stand to lose from public pension overhauls, experts say.
“In California the pension is a $500 billion problem,” Fritz said.