Ventura’s Pension Reform Setback

On August 4, 2014, California Judge Kent Kellegrew took the unusual step of removing a citizen’s initiative from the ballot that would have dramatically reformed pensions for all future employees in Ventura County, California by moving them from a defined benefit pension to a defined contribution retirement. He declared that only the legislature could make the change and that putting an initiative on the ballot would be a waste of public resources. While proponents of the initiative believed that they had the legal right to go to the people – especially since the legislature was not likely to grant such authority in the County Employee Retirement Law of 1937 anytime soon – they decided that it would be difficult to round up the necessary resources to both fight the legal battle and run an effective campaign up to the election in November, provided they were successful in their appeals process.

The reforms were modeled by a 2012 ballot initiative in San Diego, but would have not exempted public safety from the reform. While a majority of the county’s supervisors were openly opposed to the reforms and tried several times to delay or even stop the process, they eventually certified the initiative which had an overwhelming number of signatures, and placed it on the ballot. In a contortion of reason over the power of the people, it was a judge who decided that just because the people of Ventura County ratified their pension on the ballot in 1947, does not mean that they can reform their pension system by the ballot.

Unfortunately, this is the second local initiative in California to be pulled from the November 2014 ballot, after a judge in Pacific Grove decided that reforms to their public safety pension in 2002 were legally enacted, even though key information was hidden from the city council at the time.

Understanding that litigation would likely linger for years over the question of who can actuate pension reform – the legislature exclusively, or the people, from whom the legislature derives its authority – were the public to approve the measure, having a judge remove a duly certified initiative from the ballot will send a chilling message to any future ballot measures that wish to reform the pension system, which may be constitutional or not. Ed Mendel, a veteran reporter who has covered the Capitol in Sacramento for nearly three decades, provided some need historical and legal perspective in a piece at his Calpensions blog.

If previous elections provided any insight into the popularity of the reform measure with what happened in San Jose and San Diego just 2 years ago, the collection of over 40,000 signatures in 67 days showed how eager county residents were in putting this to a vote of the people. Despite the disappointing decision, two of the leaders Ventura County Taxpayers Association who introduced the initiative, David Grau and Dick Thomson, chair and president, respectively, issued a statement declaring that while this was a setback, it was not the end of the reform efforts. As quoted by Grau and Thomson, “People have the right to petition their government. It is a bedrock principle of our democracy, and this flawed ruling silences the voice of tens of thousands of Venturans who desired nothing more than the right to be heard. It is appalling to be stripped of this opportunity. For the unions to sue to deny an election is troubling proof of their fear of public opinion. That a judge enabled it is even worse. While we will not pursue further litigation in Ventura, we plan to take our spirit of reform statewide. Nothing ends here.”

Reason completed an actuarial analysis on Ventura County’s reforms and showed that if the reforms were properly implemented, “the initiative would save Ventura County $5.4 million in cash flow over the first two years, $51.6 million in cumulative savings over five years of reform, and $460 million in total savings over 15 years-all while separately eliminating $1.8 billion in pension debt. In the long run, moving to a new defined-contribution system would protect taxpayers from unfunded liabilities and investment return risks in public retirement systems.” An incredulous board of supervisors decided to get their own actuarial analysis from Segal Consulting, and when considering that the board asked Segal to not calculate the impacts of capping pensionable pay for 5 years (a major provision in the ballot initiative), the savings from the ballot initiative scenarios tracked with those provided in the Reason analysis.

While there are those who question the sanity of pursuing pension reform in California, there are many reformers throughout the state looking for opportunities in the coming years. It will remain to be seen if governor, legislature or people will have the final say.