The man who may pave the way for solving America’s pension crisis is a Democratic mayor from California. San Jose’s Chuck Reed is mounting a campaign to roll back a ludicrous legal precedent, set by the California Supreme Court, which maintains that state and local pensions constitute a contract between worker and employer that cannot be reformed. Federal standards for the private sector hold that unearned employee retirement benefits can be changed, but nearly half of America’s states have decided that those benefits in the public sector, as part of a “contract”, are set in stone.Up against the united front and deep pockets of public employee unions in California, Reed wants a voter ballot initiative to reform the state constitution so public pension plans can be revised. Steven Malanga has an excellent op-ed at Bloomberg with the details:
California courts have not only applied this precedent to pensions, but they also have recently been expanding it to other benefits. In 2011, the state Supreme Court ruled that retiree health-care benefits are, like pensions, a vested contractual right that can’t be changed. In September, a Los Angeles judge used that precedent to rule that the city couldn’t freeze retiree health-care benefits.Reed’s proposed ballot initiative to change the state constitution would specifically eliminate the notion that employee benefits are a contractual right that bars all future changes. He is pushing for the amendment because workers are challenging a San Jose pension measure approved by 70 percent of the city’s voters last November. Reed, a Democrat, promoted that local initiative to lower pension costs, because he said the change was essential to preserving the city’s fiscal future and public services. Annual payments by San Jose to fund government pensions have risen to $245 million in 2012 from $73 million in 2002.
Read the whole thing to get a sense of the steep hill Mayor Reed has to climb, and the world of possibility that awaits at the top. If California voters ratify his initiative, public officials in Illinois, New York and elsewhere may yet build up the courage to try to amend their own systems to help solve one of America’s biggest domestic challenges.[Chuck Reed photo courtesy of Getty Images]