California Governor Candidates Dodge Pension Cuts That Brown Foresees

  • Curbing public-worker benefits is tough lift for Democrats
  • Cities already under pressure from rising employee expenses

California Lieutenant Governor Gavin Newsom.

Photographer: David Paul Morris/Bloomberg

California Governor Jerry Brown said his successor likely would be able to cut public pension benefits when state finances sour. The fellow Democrats vying for his seat this year aren’t eager to wield that option.

Three of the four Democratic candidates in the June primary -- front-runner Lieutenant Governor Gavin Newsom, former Los Angeles mayor Antonio Villaraigosa, and state Treasurer John Chiang -- wouldn’t say if they would want that flexibility as governor. They also wouldn’t say if they think cities, many of which are struggling with rising retirement costs, should have that tool, which could be used as leverage in negotiating labor contracts.

Newsom "strongly believes changes in pension systems should be done with input and buy-in from workers and those who represent them -- not something that is done unilaterally," his spokesman Nathan Click said.

The circumlocution reflects political reality: Democrats rely on support from unions. It also suggests that they may turn to other painful measures, such as reducing services, before trying to change future pension benefits such as inflation adjustments.

Funding public pensions has increasingly become a credit concern weighing on some states -- New Jersey and Illinois are prime examples. And rating agencies have flagged California’s growing pension burden, which Moody’s Investors Service pegs above the median for states.

California's Retirement Costs Climb

Contributions to public pension systems will double next year from fiscal 2012

Source: California budget documents

Brown in January said legal rulings may clear the way for making cuts to public pension benefits -- specifically a case before the state’s Supreme Court in which lower courts ruled that reductions to pensions are permissible if the payments remain “reasonable” for workers. That would undermine a maxim called the California rule that holds that benefits can’t be rolled back.

"There is more flexibility than there is currently assumed by those who discuss the California rule,” Brown said at the time. In the next recession, the governor “will have the option of considering pension cutbacks for the first time,” he said.

Already, the state’s contribution to the public employees’ retirement system for the fiscal year beginning in July is double what it was in fiscal 2009. It’s worse for cities, where personnel expenses consume a greater share of budgets. A League of California Cities study found that general fund contributions to public pensions will nearly double over the next seven years. An economic downturn would mean even higher payments to make up for investment losses.

"Antonio will be honest with the people of California, starting with telling the truth about what it will take to preserve pensions going forward," said Villaraigosa’s spokesman Luis Vizcaino.

Chiang, who as treasurer is on the boards of the pension systems for state and local employees and school workers, said officials and labor representatives should discuss the rising costs.

"We’ll continue to have those conversations and make sure we have choices on the table," he said.

Jennifer Rindahl, the campaign manager for Democratic candidate and former state superintendent of public instruction Delaine Eastin, didn’t return three emails and two calls seeking comment.

In California, registered Democrats outnumber Republicans 45 percent to 26 percent. Because of California’s top-two election system, in which the top two vote-getters in a primary advance regardless of party, the candidates for the November general election could be two Democrats.

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