Yesterday Governor Brown released a list of flagrant pension system abuses he proposes to fix as part of a pension reform package. This handful of first step reforms is great as far as it goes, but voters must not be fooled into believing that these baby steps will solve the pension crisis the Little Hoover Commission recently summarized as "Pension costs will crush government."
Much like the Governor’s thrifty plan to eliminate 50,000 state cell phones to help solve a $26 billion budget deficit, these token reforms are more symbolic gestures than substantive solutions to more than $200 billion in pension debts. Painless antibiotics will not cure cancer; you need radiation and chemotherapy.
Of course, Governor Brown highlighted the importance of confronting California’s pension crisis in his inaugural address, where he recognized the need for a pension solution that is "fair to workers and fair to taxpayers." The proposals announced yesterday fall woefully short of that fair balance.
Just one of many examples, SB 27, was identified as an anti-salary spiking measure, except it has two indefensible loopholes. The measure allows employees to collect a pension on two things that never appeared in their paycheck – the money the employer paid for the employee’s share of pension costs (a huge abuse in itself) and the cost of cleaning and maintaining uniforms provided by the employer. The Governor cannot believe those giveaway provisions are fair to taxpayers. We will watch to see if these outrages are corrected.
Californians are ready for an honest, informed discussion of the type and cost of retirement benefits given to public employees. They see their own employers paying on average 5% of salary each year for retirement benefits. They see the government agencies supported by their tax dollars paying two to ten times as much. They see the average state government retiree walking away with a $1.2 million retirement package, when the average taxpayer retires with about $140,000 in his own retirement account.
It is time for substantial, not incremental, pension reform. The Little Hoover Commission joined a chorus of experts in saying California’s huge pension deficits cannot be eliminated with superior investment returns alone and that the future benefits earned by current employees must be adjusted consistent with constitutional law to help the pension funds regain their financial health. That is the starting point of the conversation about reforms California needs to stop pension costs from taking the vital education, transportation, health and safety services we need from government.
More than 80% of California voters believe that the cost of public employees is a serious problem. California Pension Reform is drafting a constitutional initiative for the June 2012 ballot that will bring the cost of California public sector retirement benefits in line with those provided in the private sector, giving all government pension plans time to regain their financial health and security. It will also provide new leadership to the pension boards that have racked up these crushing debts, ones that taxpayers decades from now will still be paying. We are past the time for palliative measures.
Faced with pension costs that are projected to "crush" government, Governor Brown needs to truly solve the problem. Let’s hope he can break the restraints of interest group politics and back real reforms. While his union supporters always argue these types of pension changes must be negotiated at the bargaining table, his willingness to sponsor this legislation is a tiny, hopeful step for California’s financial future.