When it Comes to Pensions, California is not Detroit

Ralph Miller
President, LA County Probation Officers' Union, AFSCME

Not surprisingly, within moments of news of Detroit’s bankruptcy, pension scare mongers took to their pedestals to place all the blame on pensions. California, Los Angeles, and other governments would surely follow Detroit’s footsteps in short order, they cried.

It’s simply not true, like most of the claims made by the anti-pension soldiers who have been trying for years to take away the retirement security of firefighters, teachers, police officers and other public servants.

Los Angeles Mayor Eric Garcetti set the record straight, saying: “We’re nowhere close to being Detroit … We’ve got robust industries, they rely on one or two. We have arguably 10 or 12 primary industries here. And we’ve done the hard work with pension reform that Detroit didn’t.” In reality, Detroit is a single-industry city relying almost entirely on the automobile industry. California is home to more than 38 million people and an innovation economy that spans the tech industry in Silicon Valley to the entertainment industry in Hollywood.

And when it comes to pensions, California has made significant changes to its pensions amounting to billions of dollars. Public employee unions in more than 300 municipalities throughout the state sat down at the bargaining table and made concessions. Governor Brown signed a pension reform plan into law that represents a reduction of as much of $100 billion to public employees’ benefits.

Meanwhile comparing Detroit with California’s recent bankruptcies also is wildly misleading. Stockton’s bankruptcy wasn’t caused by the city’s police officers and garbage truck drivers, but from a combination of circumstances and decisions including lavish borrowing to construct a waterfront ballpark and entertainment center. In San Bernardino, pension costs last fiscal year totaled just 4 percent of its budget shortfall. That means even if pensions were eliminated entirely, San Bernardino would still have had a $43 billion budget hole.

The New York Times Editorial Board recently wrote that cities, states and counties “should not pre-emptively reduce hard-earned benefits at the first sign of trouble.”

On top of that, California’s statewide public pension systems are in better shape today than when Jerry Brown was Governor 25 years ago. Both CalPERS and CalSTRS just posted double-digit annual returns on their investments that fare exceeded their conservative forecasts. CalPERS reports a 12.2 percent return on investments in 2012 and an 8 percent average return over the past 20 years. CalPERS has earned back the $97 billion it lost during the recession and then-some. Meanwhile, CalSTRS’ portfolio returned 13.45 percent for calendar year 2012.

But still, pension critics, including those believed to be largely funded by John Arnold, a Texas billionaire who made his fortune at Enron, are poised to try to attack the pension benefits of current employees. Breaking promises made to employees who have built their lives on these guarantees would be reprehensible and probably illegal. The vast majority of these are hard-working middle class folks, who are working for a modest pay and the promise of retirement security. It’s well past time to stop blaming the people who teach our children, protect our neighborhoods, save lives and do groundbreaking research in such life-and-death areas as environmental hazards and food safety.

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