After years of effort and prodding from Supervisors Roberta MacGlashan and Susan Peters (and a looming budget shortfall) the Sacramento County Board of Supervisors finally tackled a multi-million dollar budget problem by eliminating costly “extra” benefits for future retirees.
It’s a start — but it’s not the only budget busting pension issue: Sacramento County has nearly $950 Million in pension obligation bonds that have to be serviced from the General Fund – at the same time they’re facing significant budget cuts.
The scary thing is, Sacramento is not alone – all across California, bloated and under-funded (how did they manage to do both?) pensions have spawned a financial monster; and with few exceptions, no one is dealing with it. Public employee retiree pensions and benefits threaten to swamp already stretched budgets – throwing taxpayers into a fiscal nightmare. It’s the monster under the bridge everyone tries to pretend is not there…
First, however, it is important to separate public safety from other public employees. If you strap on a badge and a gun to face down criminals, or if you don a leather helmet and a fire hose to run into burning buildings; then we should pay you more – including healthcare, retirement, disability and survivor benefits. There are no equivalent jobs in the private sector and these are not jobs that should be awarded to the lowest bidder.
But for other public sector jobs, it’s wrong to force taxpayers to pay significantly more than for equivalent private sector jobs.
When the state finally got around to taking a look at the pension issue (just a few months ago), expert Marcia Fritz called it “a fiscal time bomb.” But public employee representatives countered with “there is no crisis.” That’s a pretty big disconnect – and shows why Democrats who control the state legislature are content to ignore the pension monster.
While debate rages over relatively low-dollar programs in the current State Budget, pensions costs have soared to nearly $3 Billion per year. And state pensions are still under-funded: conservative estimates are that the state will have to spend $6 Billion a year to meet current obligations and cover the unfunded liability. And the numbers keep going up.
And it’s not just state government – Sacramento County has nearly $1 BILLION in pension obligation bonds. The City of San Diego’s $2.3 Billion under-funded pension fiasco bumped the former Mayor from office, a boondoggle his replacement (Mayor Jerry Sander) is fighting to get under control. Orange County is once again facing a financial crisis – fueled mostly by pension costs, which are only 69 percent funded. Los Angeles County faces a $1.2 Billion pension bill. Contra Costa County boosted pension benefits from $70 Million to over $177 Million – a move that drew sharp criticism from the Grand Jury and may result in pink slips for 100 employees – many of them public safety. The list is almost endless.
A recent Business Week article reported that nationally, public employee pensions are under-funded to the tune of over $700 Billion — plus Billions more for retiree healthcare.
Oddly, liberal enclave San Francisco is a model of fiscal responsibility when it comes to pensions – they require the same voter-approval requirement for pension obligations as for General Obligation debt. Perhaps that’s why San Francisco does NOT face the same pension crisis as other governments.
This is not a diatribe against public employees – many of them are dedicated professionals who perform valuable jobs. But we can’t keep paying for benefits that are way, way beyond our means.
And, we shouldn’t bankrupt the next generation because Legislators and local elected officials were afraid to face the pension monster.
There are solutions (at least partial ones) for getting hold of the pension crisis. Studies by George Passantino at the Reason Foundation outlined some – from moving to defined contribution plans to simply shifting to 401K’s. Everyone should adopt the same voter-approval safeguards that San Francisco implemented.
Because if they don’t fix the pension problems, this financial Hydra will consume budgets, then look to taxpayers for its next meal.
You can comment on this editorial by going to it’s truncated post over on the FR Blog.