By Ed Mendel
Monday, December 23, 2013

A pension reform initiative proposed by San Jose Mayor Chuck Reed and others got a mixed cost analysis last week from the nonpartisan Legislative Analyst’s Office, quickly trumpeted by opponents.

The measure would give state and local governments the option of cutting retirement benefits current workers earn in the future, while preserving benefits already earned through past service.

The analyst said this part of the initiative has the potential to reduce “hundreds of millions to billions of dollars per year in state and local government costs,” depending on how much retirement benefits are reduced and salary and other benefits are increased.

A lesser-known part of the initiative aims to strengthen retirement benefits by requiring governments to propose, but not enact, annual plans for fully funding pensions and retiree health care in an unusually short 15 years.

The analyst said annual costs could increase “hundreds of millions to billions” over the next two decades for governments “choosing to increase contributions for unfunded liabilities, more than offset by retirement cost savings in future decades.”

Ironically, the part of the initiative intended to strengthen not cut retirement benefits created an apparent weak spot attacked by the opposition, a coalition of public employee unions.

According to the analyst, said a coalition news release, “San Jose Mayor Chuck Reed’s proposed ballot measure to slash pension benefits for public employees could potentially cost state and local governments ‘billions of dollars.’”

Reed said in a news release that the opponents “fail to acknowledge that the LAO found that these potential increases would be more than offset by the potential savings from the initiative.”

The analysis co-signed by Gov. Brown’s Finance department was sent to state Attorney General Kamala Harris. Her office will write a brief title and summary for the initiative, which is all some voters are believed to read about a measure.

Last year, Dan Pellissier said California Pension Reform suspended an initiative drive “after determining the attorney general’s false and misleading title and summary makes it nearly impossible to pass.”

Reed has said he may poll on voter reaction to the initiative title and summary before deciding whether to proceed with a drive to gather the signatures needed to place the measure on the ballot.

A polling firm hired by the union coalition found that portraying the initiative as “eliminating” public employee pensions “fosters a visceral negative response from voters,” the Sacramento Bee reported last week.

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