Public Unions
Take On Boss to Win Big Pensions
Published: June 21, 2011
COSTA MESA, Calif. — City council elections in this Southern California city
are usually sedate. Hot-button issues include whether libraries should stay open
at night. Campaign budgets often don’t top $10,000.
Then Jim Righeimer, a conservative activist and real estate developer, jumped
into the race last year.
The city was on the road to insolvency, he warned, because public employee
unions had pressured politicians into handing over generous salaries and
pensions. The police chief received $298,000 a year in total compensation, Mr.
Righeimer noted. The deputy fire chief had retired with a pension of more than
$182,000 a year.
City workers weren’t fans of Mr. Righeimer, who had been critical of public
unions for years. Local police and firefighter groups started mailing leaflets
and towing a billboard around town attacking him, implying he had skipped out on
numerous debts. Public employees spent more than $100,000 opposing him, and six
unions from neighboring regions spent another $33,000 endorsing his opponents.
“They try to drag you through the mud so bad that everyone else says, ‘I
don’t ever want these guys as enemies, I’ll just leave them alone,’ ” said
Mr. Righeimer, who still managed to win a council seat.
Costa Mesa, population 110,000, is California in miniature. For years, public
employee unions across the state have often used their influence — sometimes
behind the scenes but occasionally with public, hardball campaigns — to push for
improved worker pay and benefits. They have exercised power beyond their numbers
by donating money to lawmakers, burnishing candidates’ credentials with
endorsements and supplying volunteers during elections.
Public employee unions are hardly the only group involved in
bare-knuckles politics. Businesses lobby fiercely and executives make hefty
campaign donations.
But public workers have a unique relationship with elected officials, because
government employees are effectively negotiating with bosses whom they can
campaign to vote out of office if they don’t get what they want. Private unions,
in contrast, don’t usually have the power to fire their members’ employers.
Even in recent years, as economic troubles have worsened, benefits for some
government workers have grown. In 2008, for instance, lifeguards in Laguna Beach
started receiving increased retirement benefits as the state’s economy began to
slow. The next year, the town’s chief lifeguard retired at age 57, with a
$113,000-a-year pension after 36 years on the job.
Lawmakers in both political parties have often acceded to unions’ requests to
avoid political confrontations or to curry favor. They have pushed difficult
choices into the future.
But now, with the expenses of past promises coming due, the cost of deferred
decision-making is mounting. California alone needs to begin devoting an
additional $28 billion a year to state and local public pensions to remedy an
existing shortfall, according
to one nonpartisan study — and nationwide, estimates of such deficits reach
into the trillions over the next few decades.
“We had no idea what we were doing,” said Tony Oliveira, who as a supervisor
in Kings County, in central California, voted to increase employees’ benefits,
and now is on the board of the state’s enormous pension fund. “This was probably
the worst public policy decision in the state’s history. But everyone kept
saying there was plenty of money. And no one wants to be responsible if all the
cops quit to get paid more in the next town.”
Public employee unions, in their defense, say politicians have unfairly made
them into simplistic bogeymen, responsible for problems that have myriad causes.
Not all government workers receive generous pensions, they note. A public worker
enrolled in the state’s largest pension fund who retired in 2008 with more than
30 years of service received a pension of $66,828 a year, on average, and a
retiree with 20 to 25 years of service received around $34,872. Public workers
who retire with fewer years on the job receive even less.
Moreover, unions note that they have improved millions of lives and are
standing up for workers, who are mostly middle class, at a time when many
families are losing ground financially.
“We fight for our pensions and paychecks the same way C.E.O.’s fight for
theirs,” said Scott Diederich, a lifeguard and president of the Laguna Beach
Municipal Employees’ Association.
Union leaders argue that pension shortfalls account for a proportionally tiny
portion of governments’ financial problems and, by all accounts, there are
plenty of parties to blame for the growth in payrolls and obligations. Pension
officials add that workers are making sacrifices: in the last year, more than
100 California cities and agencies have lowered retirement benefits for new
hires or increased the amount employees must contribute for pensions.
But no matter what steps are taken, the cost of public pensions will most
likely preoccupy many states for years. In California, New Jersey and Illinois,
lawmakers may eventually need to increase taxes more than 17 percent or cut
government services to pay public retirees’ benefits, according to a nonpartisan
study. In some states, no matter how much the economy rebounds, pension funds
may not be able to meet their obligations without significant government
support.
And as legislatures in many states consider their options, battles with
public workers are becoming rancorous. In Texas, Michigan, Idaho, Arizona and
elsewhere, public employee unions have pushed for recall elections of lawmakers
or of new laws that reduce workers’ benefits. In Wisconsin, skirmishes have
temporarily shut down the state Senate, and more than a quarter of senators —
both union critics and supporters — are potentially facing recall.
In California, where the Teachers Association, the prison guards’ union, the
A.F.L.-C.I.O. and the American Federation of State, County and Municipal
Employees, or Afscme, are particularly influential, confrontations are
especially intense, though some union officials concede something needs to
change.
“Are we supposed to turn down a raise, or not fight as hard as possible for
our members?” asked Nick Berardino, general manager of the Orange County
Employees Association. “But, yes, we understand that reform is necessary and we
want to be good partners.”
But critics — who note that Mr. Berardino’s organization has helped finance
political attacks in Costa Mesa — worry that such partnerships are not capable
of an equal give-and-take.
“In my six years in Sacramento, the only time I ever received a phone call in
the middle of a vote was when the head of a state labor federation chewed me out
because I hadn’t voted yet,” said Joe Nation, a Democrat who served in the
California Assembly from 2000 to 2006. “You learned pretty quickly that you
don’t want to upset these guys.”
The Unspoken Cost
Ron Seeling warned them that serious problems could be looming.
It was 1999, and the California Public Employees’ Retirement System, or
Calpers, the large government agency that manages retirement benefits for more
than 1.6 million public workers, retirees and their families, was lobbying the
legislature to increase employees’ benefits. Calpers’s plan would lower the
retirement age for some workers to 50 years, even as it raised pensions to as
much as 90 percent of their salaries.
Lobbyists were arguing that the plan — which would ultimately create the
largest pension increase in the state’s history — wouldn’t cost “a dime of
additional taxpayer money.”
But Mr. Seeling, the agency’s chief actuary, knew that wasn’t necessarily
right. Sitting at his desk, poring over spreadsheets, he saw the truth. Calpers,
at the time, was awash in cash and many cities believed that pensions were
essentially self-funding if the stock market remained high. But if the market
stumbled, he realized, Calpers’s plan could cost taxpayers billions of dollars.
Mr. Seeling cautioned the Calpers board of the risks, but his worries were
brushed aside. Calpers’s job is to invest pension funds to get the best returns
and administer benefits to retirees. But it has also been an advocate for public
workers. Many board members, when Calpers was pushing its plan in 1999, were
closely aligned with the people who benefited from increased pensions. Six of
Calpers’s 13 board members were elected by government retirees or workers, as
required by state law. Another was a union official. Two others were politicians
who had sought union endorsements and campaign contributions.
“Labor controlled too much of the board,” Mr. Seeling, now retired himself,
said in an interview. “It’s been harmful to the state.”
When Calpers’s plan to expand pensions came up in the state Legislature,
lawmakers from both parties voted for it. On the Senate floor, it passed after
45 seconds of debate with no dissenting votes. Some legislators from that
period, in interviews, said they believed that public workers deserved to share
in the economic growth.
Other lawmakers were told if they didn’t vote for the plan, public employee
groups would attack them in ads and give their opponents tens of thousands of
dollars in contributions, and they could lose endorsements from police,
firefighters or other influential groups, according to legislators and
lobbyists.
Such threats, politicians knew, were real. Over the next five years, public
sector unions would spend more than $77 million on California state elections
and ballot initiatives alone.
Mr. Seeling issued another warning to the Calpers board at a meeting in 2001.
This time, it was considering a proposal that would encourage cities to increase
workers’ benefits by allowing officials to change actuarial calculations, so
they could raise pensions without incurring higher costs right away. One board
member, echoing Mr. Seeling’s concerns, told his colleagues they were “playing
with fire,” according to a transcript of that session. But a majority approved
the plan anyway.
In 2009, Mr. Seeling told a room of pension experts that the agency’s
ever-escalating payouts were becoming “unsustainable.”
“Board members came up to me afterwards and said, ‘We agree with you, but if
we say it publicly, it’s political suicide,’ ” Mr. Seeling recalled in an
interview.
Mr. Seeling eventually told the agency’s leaders he wanted to retire. He
still believed in Calpers’s mission and was still proud of his role in helping
millions of state workers retire with dignity. But the job’s stresses were
taking a toll.
When the financial crisis hit in 2008, his warnings came true. The value of
Calpers’s fund dropped $100 billion from its peak, losing over a third of its
worth. The cost of pension promises, however, was still going up. More than 190
California cities and agencies have increased government workers’ benefits since
the economic downturn began.
When the California Legislature tried to scale back pension costs, some
unions went on the offensive. Last year, the California Correctional Peace
Officers Association, the prison guards’ union, spent $250,000 attacking Anna
Caballero, a Democrat campaigning for state Senate. The attacks were payback,
lobbyists and lawmakers say, for legislation that slightly lowered pension rates
for some future government workers. Ms. Caballero lost that race.
The union representing the prison guards spent another $3.6 million
supporting eight dozen other candidates, including the present governor, Jerry
Brown, and criticizing their opponents.
Earlier this year, a new prison guard contract came up for approval in the
Legislature. The Legislative Analyst’s Office estimated it would cost an
additional $51 million in its first year, and Republican lawmakers, looking for
ways to narrow an estimated $10.8 billion budget gap, said they had the votes to
kill the deal.
Then a Republican senator, Anthony Cannella, changed his mind and voted for
the prison guards’ contract. It passed.
Mr. Cannella was elected over Ms. Caballero, the target of the attacks by the
correction officers’ union.
The union “was actually crucial to my election,” Mr. Cannella said in a video
produced by the union.
In a statement, Mr. Canella said that he favored pension reform, and that the
contract he had voted for, which was bundled with other agreements, forced state
employees to shoulder more of their pension costs and established equal
compensation with other state workers. A representative of the prison guard
union said it evaluated candidates based on a variety of factors, including
their philosophies, integrity and effectiveness.
Calpers says its retirement
fund is healthy, having earned back more than $70 billion of the value lost
since 2007. But it still has asked the state for $3.6 billion this fiscal year
to pay for promises made to retirees. It expects to ask for another $3.5 billion
next year.
In a statement, Calpers said that “to paint the picture that the Calpers
board and its decisions are driven by labor is misleading and inaccurate.
... The board is well diversified and decisions are not made by the board
alone,” but also by its staff. Calpers said legislators were told in 1999, when
the agency lobbied to increase worker’s benefits, that there was a cost to the
plan.
“The costs of Calpers pensions for the state represents 2.2 percent of total
general fund expenditures,” the agency wrote. “To suggest that pension costs are
the cause of layoffs, degradation of our schools or the California economy would
be irresponsible.”
In statements, Afscme said it had backed Calpers board candidates who were
most qualified to protect members’ retirements. Art Pulaski, the executive
secretary-treasurer of the California Labor Federation, a coalition of 1,200
affiliated unions, wrote in a statement that the idea “that unions have spent
money on elections to control politicians is as offensive as it as inane. In
every election, we carefully analyze candidate records and positions and support
those most likely to support policies that help working families.”
Mr. Seeling, for his part, is now enjoying retirement with a pension of about
$78,000 a year.
“I can live on it,” he said. “I wish I had more. But it’s enough. I don’t
think anyone needs that much more for a comfortable life.”
Operation Domino
It was informally known among local union leaders as “Operation Domino,” and
for years the goal was straightforward: persuade one city to increase salaries
and pensions for workers, and then approach neighboring municipalities and argue
that if the increases weren’t matched, the city’s police, firefighters or other
employees might quit, in large numbers, and go elsewhere.
By the time the dominos made it to Costa Mesa, neighboring areas had already
toppled. “The unions would say, ‘Gee, Irvine, Newport, all of these nearby
cities, they offer these higher benefits for police and firefighters and it’s a
real tight labor market, and if we don’t receive similar benefits, what if we
leave and go work there?’ ” said Allan Roeder, Costa Mesa’s city manager
for more than two decades, who retired in March with a pension of $190,000 a
year.
Then, starting about a decade ago, word began to spread that the Costa Mesa
police had more than a dozen vacancies they couldn’t fill. Graffiti became more
common. Police representatives warned that gang activity was rising and, without
strong benefits, the department couldn’t attract officers.
When Mr. Roeder went to the grocery store, residents asked him why he wasn’t
keeping the streets safe.
“When achieving public safety is threatened, law enforcement gets what they
want,” he said.
Today, many Costa Mesa police officers and other safety workers are eligible
to retire as young as 50 years of age, receiving up to 90 percent of their
salaries each year for life.
In other communities, unions used more subtle methods. Lifeguards in Newport
Beach helped win public support for increased pensions by expanding the city’s
junior lifeguard program, which started with 50 children and now enrolls 1,200 a
year.
“Everyone in this community knows we’re the people making sure their sons and
daughters don’t drown,” said Brent Jacobsen, who has been a lifeguard for 24
years. “I talk to a lot of parents because of the junior lifeguards, and I tell
them we expect to be treated fairly.”
Last year, the head of the junior lifeguard program retired with a pension of
$105,000 a year.
Soon after Newport Beach increased benefits, Mr. Jacobsen’s brother-in-law, a
lifeguard in nearby Laguna Beach, persuaded his city to raise pensions.
The costs of such increased benefits, in many places, weren’t felt for years.
But starting in 2007, Costa Mesa had to draw on its reserve accounts to pay
bills. The city stopped buying fertilizer and seed for some parks and canceled
street maintenance projects. Last year, pension costs topped $15 million, up
from $6 million a decade ago and more than triple the amount the city spent
filling potholes and maintaining playgrounds and on capital projects.
Then Mr. Righeimer declared his candidacy for city council. After winning a
bruising race, he proposed outsourcing