No coercing state to reform pension funds
The governor has spent his recent terms expanding government spending to record levels, giving in to union demands, coercing us to give up the use of fossil fuels, and raising taxes and fees. So it’s a relief he acknowledges that there is indeed some limit to state arm-twisting. We get to smoke at beaches and can soon buy weed at a corner store, so why complain if government micromanages everything else?
While the Brown administration has been a case study in using public police powers to tax and control the private sector, his administration has been less willing to use government power to get its own affairs in order. Back when Brown needed to convince voters to — you guessed it — raise taxes, he touted a plan to reform the state’s overburdened pension system.
This is a state where police sergeants routinely earn total compensation packages in the $250,000 to $350,000 range and retire at age 50 with 90 percent or more of their final years’ pay. Many University of California employees earn more than $1 million a year and median firefighter compensation tops $175,000. State employees earn medical packages that would be the envy of royalty everywhere. Then there are those myriad pension-spiking gimmicks (such as allowing managers to earn special pay for management duties).
Brown touted that oh-so modest pension-reform plan that went into effect in 2013. It didn’t address the outrageous salaries or benefit levels. It took aim at some spiking gimmicks, but clearly didn’t eliminate them. At the time, California was facing a well-publicized budget crisis and local pension-reform movements were growing, so the goal of the law was to prove to the public that lawmakers were serious about reform as a way to convince voters to approve a tax hike.
Brown got what he wanted thanks to the state’s unfathomable voters, and since then pension reform — and the growing pension crisis — has been a verboten topic in the Capitol. All is well. “Hey, we already passed pension reform in 2013,” legislators say, when pressed.
A few weeks ago, I reported on a California Public Employees’ Retirement System (CalPERS) hearing where city officials from across the state came to express their plight. Despite great earnings this year, the system is woefully underfunded and CalPERS keeps increasing the fees it charges municipalities to cover the growing pension costs.
One city official expressed concerns about bankruptcy, and another noted that in 10 years, pension costs will consume 94 cents of every payroll dollar in his city. I know government employees tend not to do very much, but imagine trying to get a permit approved when virtually the entire payroll budget goes to the obnoxious California public-retiree millionaires who are living like kings and queens in Coeur d’Alene, Park City or Santa Fe.
The city officials were pleading with CalPERS simply for more information, but the union-controlled pension fund gave them the back of the hand and didn’t approve their request. Why should cities know about their options to avoid insolvency given that those options could potentially lead people to think about trimming benefits?
A new study from Stanford University’s prestigious Institute for Economic Policy Research found that the assembled city officials weren’t crying wolf. As unfunded liabilities, or debt, grow into the hundreds of billions of dollars ($1.3 trillion, by some estimates), California municipalities are unable to keep up with the costs and still fund other public services.
We can’t feel too sorry for them, given that local governments gave in to all those union demands and embraced the retroactive pension-increasing frenzy that began in 1999, when legislators passed a union-backed law that CalPERS promised wouldn’t cost taxpayers a dime. Nope, it didn’t cost a dime. It cost untold billions of dollars.
The recent study was authored by former Democratic Assemblyman Joe Nation, so this isn’t some “right wing” effort to humiliate the public sector. It’s just a look at what the pension crisis is doing right now to municipalities. We can argue about when the pension tsunami is going to hit. Will it be a decade or more in the future? But for now cities are slashing their already shoddy public services and raising taxes to pay for all these government retirees.
“As pension funding amounts have increased, governments have reduced social, welfare and educational services, as well as ‘softer’ services, including libraries, recreation and community services,” according to the study. The report’s case studies of California counties and cities show that the biggest cuts come in services for the poor and downtrodden, yet Brown and company ignore the crisis and lecture the rest of us about helping the poor.
In fairness, California Republicans deserve blame, also. Because of their fealty to public-safety unions, they overwhelmingly backed the 1999 legislation (Senate Bill 400) and Republicans on city councils have approved giveaway compensation deals. I rarely hear the GOP legislative caucus mention the issue, although there are some notable exceptions.
Brown, who was elected with the strong support of California’s public-sector unions, fortunately has recognized that there are limits to government coercion. But those limits do not include using the government to wrangle more tax dollars out of the rest of us to pay for a system that benefits the rulers at the expense of the ruled. Don’t worry, though. We can at least smoke ourselves to death at the state’s still-gloriously beautiful beaches.
Image by Aaban