“Boot Camp” Examines Pension Cloud over Government Budgets

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Under the shadow of the public employee protests roiling Wisconsin, the California Foundation for Fiscal Responsibility and other non-profit groups held a one-day "Boot Camp" tackling the issues of benefits to public employees in California.

While the major Wisconsin issue of repealing collective bargaining for public workers was not on the Boot Camp agenda, the meeting dealt with the costs of public employee benefits and the burden they will impose on local and state government budgets.

The Boot Camp was a working session for the 200 attendees in Irvine and 350 following online made up of local government public officials and others interested in the issue, not a rally against public employees. "This is not partisan and not ideological, this is based on numbers," said Jack Dean, the publisher of the website Pension Tsunami, which gathers information around the country on the public pension issue.

Dean said the system has to be fixed for both the worker and the taxpayers. Current employees will lose benefits if nothing is fixed, he said, and it is unfair to taxpayers because they have to guarantee the benefits.

Experts in the pension field told of difficult days ahead for government budgets, although there was no agreement as to the exact size of the problem. Let’s say they would agree to an estimate of "hundreds of billions."

Girard Miller, a national authority on investment of public funds, said the larger problem is health care costs for public sector retirees. While 70-percent of pensions may be covered by some California governments, few have dealt with health care costs, setting aside less than 5-percent of the money needed.

Miller predicted that state and local governments would have to reduce their work forces by 150,000 just to cover the cost of retirees. He said there would be a minimal impact in cutting benefits for new hires because there will be fewer new hires since government will have to cut jobs to make up the money to pay benefits for retired employees.

Coincidentally, proving Miller’s assertion about job cuts versus benefit cuts, the same day as the conference San Jose Mayor Chuck Reed declared in his state of the city speech that public workers would have to see cutbacks in their benefits to deal with pension costs or the city would have to lay off workers.

Attorney Jeff Chang, whose practice deals with pensions for government and business, said that changes could be made to the benefits of current employees to ease the burden on governments. Reviewing landmark California court decisions on pension issues, Chang said that while nothing workers already earned can be taken away from them, pension formulas could be changed going forward.

The Boot Camp was the beginning of an education effort that the foundation intends to put on so that those who negotiate pensions, as well as the general public, will understand the public sector benefit system.

While the California situation looks difficult, Miller pointed out it could be worse. In Baltimore, firefighters can retire with full benefits and lifetime health care for themselves and their spouses at age 42.

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