California unions want to unwind a landmark pension reform. Who will foot the bill?

The 1998 election of Gray Davis as governor was something of a fluke.

Davis had climbed the political ladder one rung at a time, from serving as Gov. Jerry Brown’s chief of staff to a seat in the state Assembly, then a stint as state controller and another as lieutenant governor.

The 1998 primary election was a three-way Democratic slugfest pitting Davis against two wealthy, self-financed rivals, airline executive Al Checchi and Jane Harman, a Southern California member of Congress. Checchi and Harman poured millions of dollars into their campaigns, spending on media attacks against each other.

The press termed it a “murder-suicide pact” that allowed Davis to win the nomination. He then defeated Republican Attorney General Dan Lungren.

“We got a lot of breaks in this campaign,” Davis’ campaign manager, Garry South, later acknowledged. One big break was that, as Checchi and Harman were spending heavily, the state’s labor unions backed Davis with millions of campaign dollars.

It was not unlike the governor’s race this year when most unions rallied behind Xavier Becerra, rather than billionaire Tom Steyer.

Davis was a politician with an accountant’s focus on political debts — who owed him and what he owed others. Accordingly, after election, Davis quickly showed his appreciation by delivering two high-priority — and high-cost — benefit increases for unions: one in unemployment insurance payments, the other in pensions for public employees.

At the time, the public was told that both could be enacted without any substantial impacts on employers or taxpayers, but both assurances were later proven to be false.

When the Great Recession struck California a half-decade later, unemployment insurance reserves were quickly exhausted and ever since the program has survived on loans from the federal government. The state Unemployment Insurance Fund now owes the feds well over $20 billion.

The recession also clobbered earnings by the two immense public employee pension funds, the California Public Employee Retirement System and the California State Teachers Retirement System, generating demands that the state shore up their financial viability.

Davis wasn’t around when the benefits he enacted became unaffordable. In 2003, one year into his second term as governor, voters recalled him and elected Arnold Schwarzenegger as his successor.

The twin crises in unemployment insurance and pension benefits were left to Jerry Brown, Davis’ old boss, who regained the governorship in 2010. Brown did nothing on unemployment insurance but in 2012 pushed a landmark pension reform through the Legislature.

The California Public Employees Pension Reform Act contained some curbs on “pension spiking” but more importantly increased employees’ shares of costs and reduced pension eligibility and benefits for future employees. The teachers’ pension fund was shored up with increases in contributions from the state and local school systems.

The unions that had supported Davis didn’t like Brown’s reform and some challenged it in court, particularly the crackdown on pension spiking, but the lawsuits failed.

Fast forward 14 years.

Public employee unions, particularly those representing police and fire personnel, still chafe at Brown’s reform and are trying to loosen its limits on their pensions through Assembly Bill 1383, which sailed through the Assembly on a 70-2 vote. Many Republicans voted for the bill, which is now pending in the Senate.

Assemblymember Tina McKinnor, an Inglewood Democrat, is carrying the measure for a coalition of public safety unions, which argue that the reform has saved billions of dollars and has outlived its usefulness. An equally large coalition of local governments is opposing the bill, citing its potential costs and how it will affect their budgets, but so far to no avail.

AB 1383 is being watched closely because if the public safety unions can leverage the popularity of their members into undoing Brown’s reform, other unions will follow suit. Boosting pensions would widen the unfunded liabilities — in essence a multibillion-dollar unpaid debt — that still plague CalPERS even with the reform.