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Room for Debate: Debunking 12 Pension Half-Truths

The saying there are two sides to every story seems particularly true for a heated topic like pension form. It isn’t always easy to cut through the rhetoric lobbed from opposing sides when half-truths frame the debate. So Governing Magazine has decided to debunk the fallacies, misrepresentations, and myths that float out there. In total, the truth -- or lack thereof -- of 12 common statements are examined to set the record straight:

"1. "The pension mess was caused by greedy people (from the other side), not us."

2. "There's no crisis. The stock market will recover and then there is no problem."

3. "The solution is to replace pensions with 401(k) plans, like the private sector."

4. "Experts consider 80 percent to be a healthy pension funding ratio."

5. "Only 15 percent of pension costs is paid by employers. Investment income pays the lion's share."

6. "My pension contract is protected by the Constitution and can't be violated."

7. "States are already fixing the problem with reasonable pension reforms."

8. "The solution is collective bargaining. There is no need for drastic legislation."

9. "This is a $3 trillion problem when you measure it using honest (risk-free) math."

10. "We earned more than 8 percent in the last 25 years, and will do so again."

11. "The average public pension is $23,000."

12. The $100,000 pension club."

You can read Governing Magazine’s full article on each of the 12 statements here. You be the judge if they get it right.

Police Union Sues Claremont and Chamber of Commerce; Claims Free Speech Violated

In October, the city of Claremont and the local Chamber of Commerce put on an arts and crafts fair in downtown, but according to the Claremont Police Officers Association, members of the union were not allowed to hand out fliers at the event regarding the association’s position on contract negotiations. A lawsuit has now been filed against the city and the Claremont Chamber of Commerce that argues both entities violated the association’s free speech and right to assemble.

Curious what the flier actually says? You can see a copy here. In large font at the top it states: “Why is [the] City Council Gambling with Your Safety?” It urges residents to call the city council in order to make public safety the top priority.

According to the lawsuit, the Association’s president was denied space at the fair and members were told they could not hand out fliers. But the chamber counters that booth space was already booked up and that the city’s police chief did not want fliers handed out in front of the police department’s booth, which was offered as an alternative option. In a statement, the Chamber of Commerce notes, “The CPOA was simply asked to follow the same rules as everyone else and to remove a table from an unauthorized area.”

Notably, the council imposed an increase in retirement contributions by 6 percent in October. In response to the higher contribution rate, the Association filed an unfair labor practice charge and also filed a writ of mandate to obtain salary information for the city’s top officials. You can read the lawsuit here.

Senate Report Argues Defined Benefit Pension Plans are Inappropriate for Local Govts

U.S. Senator Orin Hatch has released a report on state and local public pensions that calls for greater involvement of the federal government due to fears about the impact of pension obligations on the nation’s credit rating and federal budget. Hatch is the ranking Republican on the U.S. Senate Finance Committee. The report argues it would be a mistake to blame the pension crisis on the recession or expect the issue to be resolved over time.

Hatch’s report states, “Unfunded public pension liabilities are a longstanding problem that existed well before the current economic downturn.” With respect to the debt facing state and local officials, the report notes that “This crushing debt load is ravaging state and local government budgets, and there are few options available to them for addressing this crisis – cuts in services, reductions in benefits, higher taxes, or some combination of the three.”

It is particularly notable that the report concludes that defined benefit plans are inappropriate for state and local governments. It states: “It is becoming increasingly apparent that defined benefit pension plans will never be financially sound enough over the long term for use by state and local governments. The financial risk associated with the defined benefit pension structure may be appropriate in the corporate setting, but it is inherently flawed in the state and local government setting.”

The report also blames poor fiscal discipline, overly generous benefits, and a lack of sufficient annual contributions as contributing factors for the pension crisis and posits that action is needed now and calls for a new public pension plan structure that is affordable and more transparent. The report concludes that “A legislative solution for consideration by Congress will be introduced in the senate in the near future.” You can read the full report here.

Military Imposters: Walnut Considers a Ban on Fake Military Uniforms

If you have a fondness for dressing up in some type of military outfit, then you might want to avoid the city of Walnut in the future, as officials are considering an ordinance that would make it illegal to wear a fake military uniform or insignia on public property. If caught, under the terms of the proposed law, offenders could be arrested and charged with a misdemeanor. The ordinance would bar anyone who hasn’t served from wearing such a uniform of the U.S. Government.

City Councilman Tom King is a chief proponent of the law and he has criticized those who dress up in fake military garb, especially those who have not served and yet have taken part in 9/11 ceremonies. The Valley Tribune reports:

“King was returning from his weekend service in the California military reserve when he saw a 50-year-old man wearing ribbons from World War II and the Spanish American War at Creekside Park and taking part in the ceremony for ‘9/11 heroes.’ He said the real heroes - either first responders or members of the military - should be honored at such ceremonies.”

It’s worth noting that several months ago in Temple City, the Los Angeles County District Attorney's Office found an immigration scam that utilized fake military uniforms. A Chinese national preyed on around 100 Chinese nationals as part of an immigration scam that charged recruits between $300 and $450, along with renewal fees of $120 each year. Recruits were lured in with the promise of a path to citizenship, despite the unit being entirely phony. The military uniforms and documents that recruits were provided were described as looking “official.” The unit must have looked professional enough, as it even appeared at one point in a parade in Monterey Park.

Records Policy Faces More Scrutiny in Anaheim after 2 Orders to Purge Files

We relayed recently that open government advocates were alarmed by the revelation that an Anaheim Planning Department official ordered employees to delete old documents from city files. The Voice of OC subsequently reported that a similar memo had been sent by an Anaheim Community Preservation Manager who told workers “not to archive emails for any purpose." Similarly, the memo also included a threat about disciplinary action if city emails were archived. You can read the second email message here.

Such city records must be kept for two years and can only be destroyed after authorization by the City Council, according to state law. Both of the aforementioned memos were sent out after a records request was made by the Voice of OC.

Originally city officials argued that the memos were merely a reminder of the city’s retention policy, but Mayor Tom Tait eventually issued a statement on the matter:

“The City has a retention schedule and administrative regulations for the management of public records in accordance with state laws. Unfortunately, these emails within the Planning Department and the manner in which they were articulated were a mistake. We are taking corrective action to assure this does not happen again.”

In another update, this week the mayor directed staff to review the city’s retention policy with respect to records to verify compliance with the law. The city plans to examine its email policy since reportedly many are deleted automatically after 30 days. The Voice of OC points out that “Anaheim is but one of a number of cities in Orange County that purge emails in as little as 30 days, a Voice of OC investigation in 2010 found. First Amendment experts said the cities are violating state records laws. After receiving legal threats from CalAware, the city of Irvine reformed its records policy to archive emails identified as "business records" for two years.”

Winter Slump: Controller’s Revenue Update; $165.2 Million Below Projections

Although the governor only just announced his budget for 2012-13, its numbers are already falling below expectations. Controller John Chiang, who released December’s cash update, notes that revenues came in $165.2 million below the latest projections contained in the Governor’s proposed budget. In comparison to the 2011 Budget Act, December revenues were $1.4 billion below estimates. Chiang commented:

“While we saw positive numbers in November, December’s totals failed to meet even the latest revenue projections. Coupled with higher spending tied to unrealized cost savings, these latest revenue figures create growing concern that legislative action may be needed in the near future to ensure that the State can meet its payment obligations.”

There was one bright spot: December’s sales tax totals came in above estimates by $17 million (1.1 percent). Still, personal income taxes were $69.8 million down (-1.4 percent), and corporate taxes also dropped by $19.5 million (-1.4 percent). Hope is on the horizon though, as the Controller notes, “The balance of holiday sales tax receipts will be seen in late January and early February.” As for local governments, and specifically counties, it’s a good sign that sales tax revenues are up, which translates to higher revenues for realignment and since vehicle license registrations have also increased, funds for realignment will also receive another boost.

See December’s financial statement here.

Summary analysis is available here.

Strong Cities, Strong State: Healdsburg and Manteca’s Profiles Join Campaign

When you long for small town charm, then come to Healdsburg. Envision a town with the best qualities of turn-of-the century America, yet with the ambiance of a European countryside. Tucked between three lush valleys and surrounded by over 60 wineries, Healdsburg is nestled in the heart of the wine country. The city is only 65 miles north of San Francisco on Hwy. 101. Home to approximately 12,000 residents, the City encompasses 3.56 square miles and enjoys a mild climate with average temperatures. Healdsburg’s success stories include the following:

• Giorgi Park Rehabilitation Project: The City of Healdsburg was selected as the 2010 California Park and Recreation Society (CPRS) Award of Excellence recipient in the category of Park Planning, for the Giorgi Park Rehabilitation Project in the population category of up to 20,000.
• Economic Development Program: Through the City Council Goals of 2010 and the Healdsburg General Plan, the City of Healdsburg Redevelopment Agency (Agency) is committed to providing a business-friendly environment that fosters community growth and prosperity through economic development programs.
• Safe Route to School Improvement: The City of Healdsburg recently completed Phase I of the Grant Street Safe Route to School Improvement project. This project was funded in part by a $896,000 Safe Route to School Grant the City was awarded.

Read more, see photos, and connect with the city here.

Nestled within the Northern San Joaquin Valley, Manteca – locally referred to as “The Heart of California” – is a wonderfully dynamic community, offering its residents the luxury of suburban living in a more tranquil, rural environment. Its strategic location places it at the gateway to Yosemite, near the Delta Waterways, San Francisco Bay Area and the Sierra Nevada. This central position makes it an ideal place for establishing a family or business, as well as a great destination for a relaxing vacation. Manteca still remains tightly connected to its agricultural heritage, but has more recently become a strong economic development location within California. Manteca’s success stories include the following:

• Recreation: Manteca’s Convention and Visitors Bureau coined the phrase “Hook, Wine & Sneakers” to brand what we have to offer in Manteca. Manteca truly is a sports mecca for the young and old alike.
• Ideal Business Location: With a strong business partnership with our local Chamber of Commerce and our local businesses, we work together to bring more economic growth to our community – and it is working.
• Transportation: Mountain Valley Express, a long-term trucking company founded in Manteca, once said in a public meeting that every trucking company in California should be based here in Manteca. Because of our strategic location to major transportation hubs, our drivers have less “windshield” time.

Read more, see photos, and connect with the city here.

Potential Cancellation of Cal Fire Contract Inspires Recall Campaign in Atwater; Union Ploy?

A recall campaign is heating up in the city of Atwater over the possibility of returning once again to a city-run fire department, which would require the cancellation of a contract with Cal Fire. Councilman Jeff Rivero, Mayor Pro Tem Joe Rivero and Councilman Gary Frago have expressed support for such a change because they posit it could save Atwater money without compromising the quality of the city’s public safety services.

However, critics and recall proponents don’t see it that way. Councilman Jeff Rivero in particular is the target of the recall campaign because his term does not expire in November. The effort is being spearheaded by a group of residents who have already begun the process of filling out recall paperwork. Recall supporters believe the city cannot afford its own fire department, especially since Atwater is growing and the level of service it requires will also grow.

Notably, no decision has been made yet on the Cal Fire contract, but the issue has still managed to inspire the initial stages of a recall. It’s also worth mentioning that one of the recall’s major proponents is married to a Cal Fire employee, which has led officials to call the effort a ploy to protect the firefighter union’s turf. The Merced Star reports the following on such sentiments:

“Fred Warchol, a planning commissioner who worked on Jeff Rivero's campaign, said the union, CDF Firefighters, is pushing the recall as a way to protect its interests by retaining the Cal Fire contract with the city. ‘They feel that Jeff, Joe and Gary are a threat to them retaining this contract,’ Warchol said, adding that moving back to a city-run fire department could ‘absolutely be done’ with a lot of foresight and effort. The city leaders are doing their job by scrutinizing the arrangement, he said. ‘I think they absolutely have an obligation to look into this,’ he said. ‘Our city budget is in a precarious position, like many city budgets in the state of California.’”

Cal Fire also recently filed a public records request to obtain messages between the council members about the contract. In response to the recall campaign, Councilman Rivero commented, “I've worked extremely hard for the citizens of Atwater. I don't know how I could have worked any harder, but I worked for the people.”

Concerns about Double-Taxation Remain as Rural Fire Fee is Revised

The much-hated rural fire fee is back in the news, as a new draft was recently released with several new provisions. The state Board of Forestry and Fire Protection will hold a hearing on January 11th to determine if the latest incarnation will move forward. As a refresher, property owners who fall under State Responsibility Areas (SRA) will have to dole out $150 annually and additional stipulations are sure to enrage critics. For instance, the fee will be $300 if a parcel of land has two single-family homes on it and duplexes will also be subject to the $150 fee. The governor also rejected a smaller fee that was proposed, which would have been $90 due to a series of credits.

There were also previously concerns that jails or hospitals would be charged extra due to ambiguously worded provisions, but new changes state that these types of buildings will be charged the same $150 fee.

Despite strong objections from local government leaders, the administration is sticking to its guns, with Brown commenting that “To me it’s just simple. People need to share the burden of the benefits they receive. That’s the principle.” However, CSAC has called the fee "double-taxation without any additional benefit" for communities that already support local fire stations. The Half Moon Bay reports on how rural residents regard the fee due to concerns about double taxation:

“The city of La Honda stays relatively moist even during the hot summer months and hasn't experienced a major forest fire in over 50 years. Nonetheless, local homeowners agree to pay 1 percent of their property taxes to support the La Honda Fire Brigade, a volunteer fire department that derives most of its annual budget from donations and fundraising. The same goes for Kings Mountain, where residents for decades have held a successful annual art fair to raise money for the local fire station. [A resident] points out a $150 state surcharge would be more than double what he annually pays through taxes and donations for local fire protection.”

Reportedly the fees could take full effect by April. Expect legal challenges, as has been the case with many aspects of the state budget. Taxpayers may be less-than-pleased to hear that of the millions collected, over $3 million will go to the State Board of Equalization as a fee for doing the billing. We relayed previously that while the California Board of Forestry and Fire Protection originally revised the fee structure so that rural residents could only be charged a maximum of $90, new appointees to the Board allowed the ultimate fee amount to go higher, as the board was restocked with Brown appointees. The governor took issue with the lowered fee back in August because the Administration and legislators are relying on the revenue for the patched up state budget.

A fact sheet on Cal Fire’s coverage across the state can be seen here.

LAO Disputes Revenues Outlined in Guv’s Tax Plan; Guv’s Comments on Local Govt.

Governor Brown is doing all he can to hype his tax initiative, which he has proposed in order to raise $7 billion annually in revenues. When he announced his budget, Brown stated he was really committed to paying back the wall of debt and eliminating the deficit, which he argues could be accomplished through the approval of his measure. Then the governor laid out the threats, noting that he would be forced to pull additional trigger cuts if the initiative does not succeed. The Administration’s new budget is a $92.6 billion spending plan and experts have called it the largest ransom note in California political history due to the consequences that have been outlined if Brown doesn’t get his way on the initiative.

However, it’s now been revealed that the LAO and the Department of Finance don’t see eye-to-eye on the amount of revenues the tax proposal will actually generate. According to the LAO’s analysis, the initiative would only raise $4.8 billion, which is $2.1 billion less than what the governor has put forth. The discrepancy in numbers is notable because it could mean deeper cuts or the need for even more revenues. In a joint letter, Legislative Analyst Marc Taylor comments, “The volatility described above makes it difficult to forecast this measure's state revenue gains from high-income taxpayers. As a result, the estimates from our two offices of this measure's annual revenue increases vary."

If the governor’s initiative does in fact take in less revenue than projected by the Administration, it could undercut his promises to the local government group CSAC (California State Association of Counties). Brown recently convinced CSAC to drop its own initiative, which was a competing plan that sought to secure funding for realignment. One of the governor’s points of persuasion was that his initiative would have a broader coalition of support and raise more revenue.

On the topic of local government, the governor also made a few comments during his press conference about the release of his budget. He outlined that he wishes to expand realignment and commented, “We should be giving more discretion to cities, counties, and school districts [...] local democracy is as responsive and vigorous as state democracy.”
 
The governor was also asked about redevelopment and he reiterated previous statements made by administration officials. But he did note, “I understand concerns about economic development.” The governor went on to say he cut out redevelopment because the state is short of money, not because he dislikes RDAs. He posited that other services simply must trump the need for redevelopment and that the money has to come from somewhere, noting the state was in a box.

If you haven’t seen it, you can read the governor’s budget here.