LOS ANGELES - The postponement of a pension reform initiative proposal is a credit negative for California local governments, which are facing rapidly growing pension costs with few tools to address them, according to Moody's Investors Service.
"Adoption of this pension reform measure would have amended the state's constitution and provided local governments with a significant measure of additional pension cost flexibility," Moody's analysts Thomas Aaron and Eric Hoffmann wrote in a report released March 20.
Proponents postponed efforts to gather petition signatures to place the
The measure aimed to allow local governments to negotiate lower pension benefits for future work by current employees, while leaving benefits accrued prior to any such renegotiation unaffected.
Currently, California law protects both current employees' accrued pension benefits and those for future work. Generally, pension benefits cannot be reduced once an employee has been hired.
Supporters of the measure challenged a ballot summary written by State Attorney General Kamala Harris, calling its phrasing "false, misleading, partial and/or argumentative. They also said it "unnecessarily highlighted popular and sympathetic categories of public employees" such as teachers, nurses, and peace officers.
Superior Court Judge Allen Summer denied the challenge, saying he found "nothing false or misleading" about Harris' description of the measure.
San Jose Mayor Chuck Reed and other backers of the measure said they would now aim to get the measure on the 2016 ballot.
"Local government pension costs in California continue to rise, prompting San Jose Mayor Chuck Reed, Anaheim Mayor Tom Tait and several others to launch the initiative," Moody's analysts said. "For Moody's-rated local governments, pension costs increased by an average of 14% from fiscal 2011 to 2012, and absent pension reform, we expect this rate of increase to continue for the next several years."
They added that costs are escalating particularly for the thousands of local governments that participate in the California Public Employees Retirement System, including Anaheim.
