California Pension Reform Could Kill Unions

Unions' Final Stake (image by Mugley)

California’s Legislative Analyst’s Office (LAO) is proposing pension cuts for teachers and other public employees. The LAO’s director, Jason Sisney, said the current system is too inflexible to cover all the unfunded debt and wants it to match “that of other Californians,” which is to say the all Californians (except the rich) should gladly accept standard of living cuts now and when they retire.

Sisney proposed two possible changes: a hybrid system with lower guaranteed benefits, paid for by matching employee-employer contributions to a mutual fund-like plan, similar to those found in private industry; or to continued with the current plan, but with employees forced to incur a larger share of the costs and risks. Ultimately, whichever plan goes into effect, public employees would no longer have guaranteed benefits, as they currently do, which means that a stock market crash or corrupt or stupid investments by employees or their pension managers could wipe out all or a portion of their retirement savings, without any recourse, thus potentially pauperizing teachers, cops and firefighters, and other public employees.

The LAO is recommending that CalSTRS, the teacher pension system, be unlinked from state government subsidies and state guarantees of benefits. Republicans across the country are demanding the gutting or dismantling of public employee pension systems and California is not immune. Some state Republicans are insisting that the state “reform” (read: gut) the pension system before they will agree to placing a $12 billion extension of the current tax rates on the June ballot. If the tax measure fails to make the ballot, or if the public votes it down, California schools will face huge cuts.

Analysts are saying that the system needs an influx of $3.8 billion over the next 30 years. Without taxpayer funding, this would require an 8% increase in teacher and administrator contributions, or a 14-16% increase in district contributions. With districts staggering under several years of cuts in state funding and declining local property tax contributions, teachers will likely be threatened with more pay and benefits cuts to make up the difference.

Much of the hit will be forced upon new teachers, in part because it an easier fight for administrators and politicians to put it on those who haven’t yet become used to and expect the status quo. However, the unions are also likely to go for a compromise that protects or limits the costs to current employees at the expense of newbies for similar reasons: newbies do not yet exist and are not yet union members and, therefore, are not protected by the union.

It would be a terrible mistake for unions to make this compromise because those new hires will eventually become union members (as long as California remains a closed shop state), but they will be resentful and potentially rebellious union members. They will begin work with the attitude that the union is their enemy. They will be harder to organize and mobilize for important union battles over school reform, tenure, seniority, pay and benefits. Eventually they will grow and become the majority, as older teachers retire and leave the profession. They will be easy to cajole into believing the lies about Right-to-Work laws and general anti-union propaganda.

The youngest and newest teachers tend to have the least amount of labor consciousness and union buy-in in the first place. One reason for this is that the union leadership have not invested the time and resources into organizing and educating them, assuming that they will fall into line when needed. They exacerbate this tension by abandoning them during pink slip season, (coming very soon to California). Temporary and non-tenured teachers are the first to go and the teachers unions have historically let them get canned without a fight on their behalf, arguing that it is in the districts’ rights. Yet such a stance sends the message to younger teachers that they are expendable fodder in the struggle to protect the jobs of older teachers. The union is willing to take their dues, but gives them virtually nothing in defense of their jobs. A compromise with the state on pensions, particularly a two-tiered system that gives newer employees less benefits and/or greater costs, may be the final straw for many newer teachers.