A pension head fake
California Republicans did a fine job playing the pension-reform hand that Gov. Jerry Brown handed them. On Nov. 9, Senate Republican leader Bob Dutton and three of his GOP colleagues held a news conference calling for the Democrat-controlled Legislature to hold a special session to deal with the governor’s 12-point pension plan, which had just been released the week before. They are now trying to pressure the governor to stand up for his own proposal.
Sadly, Brown’s reforms were never actually intended to succeed.
Brown wants all public employees, who often pay nothing in contributions toward their retirement, to pitch in at least 50 percent of the costs. He proposed a hybrid retirement system that combines the defined-benefit system now enjoyed by public employees (their pension payouts are guaranteed based on a formula) with the defined-contribution — 401(k)-style — typical in the private sector. He didn’t offer details, but this system would at least start to move away from the lush defined-benefit plans that guarantee employees a set amount of benefits.
Brown also called for government employees to work until they are older. He proposed a new retirement age of 67 for most workers, but didn’t specify an age for police, firefighters and others in the public-safety professions. Brown’s plan would eliminate the most egregious pension-spiking abuses, such as the purchasing of “airtime” — when public employees purchase additional retirement credits at a small percentage of the cost to taxpayers. The Brown plan would also ban retroactive pension increasing, a common phenomenon in which employees are granted pension increases going back to the day they started working.
Given the size of the state’s pension debt — estimated by Stanford University to be as high as a half-trillion dollars — even a liberal Democratic governor felt obliged to join the growing chorus calling for reforms in the state pension system.
The Brown plan makes sense, although it deals mainly with future hires, so it wouldn’t do much to fix the current pension debt caused by current employees. That said, pension reformers agree that it would be a good start — provided the governor has a serious plan for overcoming obvious obstacles from a pro-union Legislature.
But it doesn’t look like Brown is serious.
Republicans believe that once the new legislative session opens in January, pensions will fall by the wayside as everyone focuses on the state’s enduring budget deficit. Brown’s spokesman said the governor and legislators will tackle this issue next year, so there’s virtually no chance that one will be called. Ergo the governor’s plan, meritorious albeit insufficient, will not be treated seriously.
The state’s Democrat-dominated Legislature is led, after all, by two union activists. Last year, a mere effort to strip pensions from convicted felons couldn’t even get a hearing. Union leaders come out en masse whenever any pension-reform measure is proposed, no matter how modest. The Brown plan must make it through a political environment that views pension reform as a right-wing plot against workers.
Which explains ongoing efforts to put pension reform on the state and local ballots. (Ballot initiatives have become central to major in-state legislative efforts.) Californians for Pension Reform filed two alternative pension measures with the state attorney general’s office earlier this month, and will soon begin gathering signatures once it decides which of the two alternatives to focus on. On Election Day, San Francisco voters approved a modest union-backed pension-reform measure and Modesto voters approved an advisory measure that supports a switch to 401(k)-type retirement programs for government employees. San Diego voters will decide on a far-reaching pension-reform initiative in June.
“I commend Gov. Brown for beginning the process of reforming our massive unfunded liability,” said Sen. Mimi Walters, an Orange County Republican and pension-reform champion. But the plan was merely Brown’s way of saying, “You want pension reform? Here it is.” So far, he has governed largely as an advocate for the public-sector unions that helped elect him to office.
The nonpartisan Legislative Analyst’s Office has already released its analysis of the Brown plan. The office admitted there are “substantial problems” in the current system, but warned that the governor should focus solely on future employee benefits because “raising current workers’ contributions is a legal and collective bargaining minefield.”
But that approach will not fix the problem. The Little Hoover Commission — a government reform panel — made the opposite argument in February. It said pensions must be frozen for current employees, or such employees will face “salary freezes, layoffs, increased payroll deductions and the threat of a city or county bankruptcy” as governments run out of money.
Unfortunately, it appears that the governor was just being cynical. He released a decent reform plan, but he has no intention to expend any serious effort to get it through a hostile legislature. Even if he tried, it would be a tough road. The only hope is the initiative drive, and it’s encouraging that pension reformers have finally settled on some good measures. California will lumber along until the situation becomes more dire, which is how its leaders handle every problem.