In the December issue of The Municipal, one of the stories we published called out some of the difficulties involved in fixing the country’s public pension crisis. We know how big the problem is. The question is now which measures should be taken to rectify it.
During the same forum in which Josh McGee and Adrian Moore of the Reason Foundation; former Utah Senator Dan Liljenquist; former San Diego City Council Member Carl DeMaio; and San Jose, Calif., Council Member Pete Constant discussed the challenges of the situation and shared success stories, forum members also outlined six steps for effecting a pension reform project. I’m not going to say that they are six easy steps, because if they were then we probably wouldn’t have wound up with a crisis in the first place. But they are effective, and not only that: They’re preemptive as well.
The suggestions were:
1. Research your pension problem by understanding the current liability and contribution structure; examine administration practices such as actuarial assumptions and disability approvals; pull existing labor contracts to understand the benefit structures; benchmark compensation and benefits to the local labor market; and compile examples of excessive payouts and/or underfunding and debt.
2. Examine options for reform by understanding the timetable for labor contract changes; explore avenues for implementing reform, such as legislative votes, public initiatives and legal challenges; and engage outside counsel to review case law, contract terms and reform options.
3. Create a coalition of reformers by identifying the power centers that drive government policy and that have a stake in local government, because independence from political pressure will be key. Create a small steering committee that will “own” the project, tap existing reform resources like the Reason Foundation, Arnold Foundation and others; and request “angel funding” for fiscal and legal analysis.
4. Build the political and fiscal case. Consider testing the waters of government counsel and pension board on reform concepts; create summary materials that state the case for reform, with advance answers to objections; conduct polling on reform concepts to capture public support; commission actuaries to quantify the savings; and be prepared to address phony “transition cost” objections.
5. Engage elected leaders and labor unions by identifying one or more “sponsors” from among elected officials, both inside and outside of the government entity; brief all elected officials, even those who are inclined to oppose because this gives them the chance to get on board and make this their idea; and be clear on the consequences of not acting
6. Take your case public. First define the problem well, in part by engaging investigative reporters and editorial boards on the problems that were uncovered. Hold town hall meetings/hearings, which will also engage the public. Tell them where the money is going and what they’re sacrificing for these big pensions. Robocalls and emails in advance of key votes are also useful, as are endorsement surveys and scorecards of local groups. Once the problem is well-defined, reveal solutions. Be prepared for the fact that the “Decision Point” on reform is different for each jurisdiction and could be during labor negotiations, the usual legislative process, a ballot initiative, a court case, candidate elections or a combination of these.
Happy New Year, and best wishes on this issue and on all of your 2014 endeavors.