Pension tapeworm gnaws at budgets

A Register investigation reported Sunday that lucrative public employee pension benefits approved during the past decade have been “a toxin spreading through the budget books of cities and counties across California.” These escalating costs ultimately threaten many local governments’ solvency.

Though many states experience similar fiscal threats, “California is the only one that allows nearly all public safety workers to retire at age 50 with 90 percent of their salaries,” Register reporters Tony Saavedra and Brian Joseph reported.

The Register story, “Pension System Run Amuck, Dec. 20,” painted a comprehensively gloomy picture of billions in unfunded liabilities amassed in city and county pension systems throughout California. The story blamed good intentions, aggressive public employee groups’ lobbying and the “bad luck” of substantial losses in investments intended to cover pension costs.

We can add one more, perhaps the most responsible factor for this accelerating fiscal train wreck: irresponsible public officials asleep at the switch.

“That was the worst mistake we have ever made,” reflected Dwight Stenbakken, deputy executive director of the League of California Cities, which Register reporters said “stood silent” as the Legislature increased pension formulas for all state employees and public safety workers. One critic told the Register: “The attitude was, ‘Hey, we have a ton of money, let’s give it away.’ There weren’t a lot of deep thinkers there.”

Former Buena Park Councilman Steve Berry recalled “no quantifying, no study, just hearsay that was being handed out” when his city, like others, was persuaded to hike pensions for fear of losing police officers to other jurisdictions. But such arguments have nothing to do with difficulty recruiting qualified police officers, Santa Ana College criminal justice department head George Wright told the Register.

In the decade since the Legislature increased pension benefits, the California Public Employees’ Retirement System has more than doubled payouts, to $10.8 billion a year, while turning a $32-billion surplus into a $35-billion unfunded liability when calculating future payouts.

We have warned of the looming public pension catastrophe, perhaps the most serious fiscal issue facing government today. Former Register columnist and editorial writer Steven Greenhut lays out a persuasive case for curbing the growing threat in his new book, “Plunder, How Public Employee Unions Are Raiding Treasuries Controlling Our Lives and Bankrupting the Nation.”

Many cities finally are considering lowering pension benefits for new hires, and Orange County government is appealing a judge’s ruling that barred it from rolling back the lucrative formula for deputy sheriffs’ pensions. Meanwhile, to reduce costs, the county created a two-tier pension formula for non-public safety employees. These moves are better late than never, but it’s unclear whether they will be sufficient to avoid fiscal calamity, as ongoing pension costs eat ever-growing percentages of local governments’ general fund budgets.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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