I was almost amused to read over at the Sacramento Bee’s Capitol Alert Blog that Governor Brown has apparently rolled up his sleeves and is working on a public employee pension reform plan with his staff. Especially when he was asked by the media about the specifics that would be included, and he apparently responded, "As much as we can include that will not set at loggerheads all the opposing parties."
As I have often said on this blog, public employee unions (all employee unions) are creatures that live for two purposes only — to increase their size, and to increase the salary, benefits and regulatory environment to the benefit of their members. That’s it.
This is why unions like the California Teachers Association look ridiculous saying that they are about "the kids" when, for example, they don’t want to lay off the worst teachers first, but the most recently hired teachers first. In fact, they go so far as to say that you should not be able to rank teaches based on outcomes (specifically, on the achievement level of the children they are teaching). Or in the case of public safety unions — when cities get to a point where they are cutting services in order to pay for the incredible burden that unaffordable pension plans like 3% @ 50, the only response is that taxes must be raised on the local citizens.
The point I am making is that while you can certainly put together a pension "reform" measure under the Capitol Dome, such a plan by definition will need sign off by SEIU 1000, the California Teachers Association, and such. It is in their political interests to sign off on some "fig leaf" reform that helps to deflate some of the frustration of the public who sees the number of six-figure-a-year local and state public employee retirees going through the roof — a new upper-middle class of pensioners.
The problem is that "fig leaf" or to use Brown’s terminology "no loggerheads" reform really amounts to no fundamental reform. What is fundamental reform? It is outcome based. How do you change the system so that we significantly reduce state and local unfunded pension liabilities? The answer to that, of course, is that you have to substantially reduce the retirement benefits for current employees for future years of service. To do otherwise will not impact the current problem. It would be like trying to solve America’s underfunding of Social Security by raising the retirement age of people not yet born. This is a real-time problem, a today problem (and a next generation problem).
The reality is that politicians at the local and state level agreed to public employee pension benefits that are no where near to realistic, affordable and sustainable.
I am going to close by drawing your attention to a recent column by Dan Borenstein, a well respected columnist with the Contra Costa Times, which is excerpted in part below. He is very articulate in describing the problem and why significant reforms are needed in our state pension system.
And none of this goes to the fact that these very same unions spend vast sums of money to elect and re-elect politicians who look out for their interests in public office. Even if Jerry Brown wanted to push the reforms needed to get the state out of this public pension pickle, it is improbable that the votes are there in the legislature (heck, the only jobs that Speaker Perez has held in his career, before being elected, was working professionally for public employee unions).
Here’s the Borenstein piece… And to the Governor — good luck with that "no loggerheads" approach. Come to think of it, not very amusing at all…
Bipartisan report right on need for radical pension change
By Daniel Borenstein
Contra Costa Times columnist
California’s public employee pensions, the most generous in the country, will strangle funding for needed public services unless officials reduce future retirement benefit accruals for current workers.
That’s the well-reasoned conclusion of the Little Hoover Commission, a bipartisan watchdog group whose current members were appointed by the state Legislature and former Gov. Arnold Schwarzenegger. "The situation is dire," commissioners reported Thursday following a yearlong investigation. "State and local governments have made a promise to workers they can no longer afford."
Let’s be clear: The commission is not suggesting taking away benefits workers have already earned. It’s proposing reducing, not eliminating, the rate at which current workers accrue pension benefits for their future labor. It’s a change common in the private sector when companies realize their pensions are too expensive.
To ensure workers have enough in retirement, the commission also proposes adding 401(k)-style savings plans and Social Security for roughly half the public-employee workforce that doesn’t already participate.
Efforts to reduce benefits for future employees are fine. But that will not make a meaningful difference for decades, the commission concluded. The problem "cannot be solved without addressing the pension liabilities of current employees."
As commission Chairman Daniel Hancock told me, "You can’t fix it on the backs of new employees. You can’t move the needle fast enough." He is right.
He also knows public-employee union leaders are sure to challenge any rollback efforts in court. Many politicians will dismiss the idea. And it remains to be seen whether Gov. Jerry Brown understands the urgency and necessity of radical action. But it’s the only way out.
The commission’s 89-page assessment provides a comprehensive analysis of the state and local government pension crisis — must reading for politicians and taxpayers who wants to understand the history and seriousness of the problem.
Public employees should read it before demanding perpetuation of pension benefits unseen in the private sector. As the report notes, public-employee pensions have been transformed for many from a mechanism for providing retirement security into a vehicle for accumulating wealth.
Read the rest of Borenstein’s outstanding column here.