Eber: Real pension reform in California

Last Friday I had the honor of guest hosting the Andy Caldwell Show, on KUHL—Santa Maria and 1290am Santa Barbara.  My first guest was Rich Eber—and this article is actually an expansion of his talking points, preparing for the show.  Maybe the most important issue facing Californians is the collapse of CalPERS—today we have a companion piece, “The Next CalPERS Victim: City of Oroville”.  City after city are going broke, cutting cops, stopping the repair of streets, just to finance CalPERS—and as the city manager of Modesto said,. CalPERS is unsustainable”.  This is good money chasing bad money.

One might ask why this collapse of public employee pension plans is not a relevant subject at the so called bargaining table.  For one thing tax payers do not have a seat at these negotiations.  The unions are making agreements with political hacks that are responsible for electing them to office in the first place. Apparently, conflict of interest rules don’t apply in these cases.

The pension crisis did not occur overnight. The current downward spiral started in 1999 back in the administration of Governor Gray Davis. At the time CalPERS and other pension funds had a major surplus of funds assisted at the time by double digit profits in their investment portfolio. To take advantage of this good fortune, SB-400 was passed.

It increased pensions for all levels of public employees based upon the false notion that the stock market would continue to climb to record levels.  When the recession soon hit combined with horrendous investment decisions by unaccountable management employees at CalPERS, tax payers have ended up holding the bag.

How bad is it?  Jerry Brown is STEALING $6 billion from a reserve fund, money meant for dozens of other agencies.  This is an important article, please forward to your email list—our economic future is in danger.

Calpers headquarters is seen in Sacramento, California, October 21, 2009. REUTERS/Max Whittaker

Calpers headquarters is seen in Sacramento, California, October 21, 2009. REUTERS/Max Whittaker

Real pension reform in California by Richard Eber

Richard Eber, California Political News and Views  6/20/17

 

I’m sick of it.  When it comes to the failing public employee pension programs in California, it is easy to relate to iconic character Howard Beal in the move classic  Network who quipped ‘I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!’

What has turned out to be a man made pension crisis in California is ridiculous.  Just because public employee unions control both the Republican and Democratic Parties in California, does that mean their members are entitled to retirement pay that is more for the gross income of over half the households in California?

In doing this, pension funds that support these workers are at least a trillion dollars in the hole. All the governor can do is give what amounts to a six billion dollar gift/loan to the failing system.  He is afraid to put this before voters or even have the legislature deal with the problem.  This situation is that poisonous and volatile.

One might ask why this collapse of public employee pension plans is not a relevant subject at the so called bargaining table.  For one thing tax payers do not have a seat at these negotiations.  The unions are making agreements with political hacks that are responsible for electing them to office in the first place. Apparently, conflict of interest rules don’t apply in these cases.

The pension crisis did not occur overnight. The current downward spiral started in 1999 back in the administration of Governor Gray Davis. At the time CalPERS and other pension funds had a major surplus of funds assisted at the time by double digit profits in their investment portfolio. To take advantage of this good fortune, SB-400 was passed.

It increased pensions for all levels of public employees based upon the false notion that the stock market would continue to climb to record levels.  When the recession soon hit combined with horrendous investment decisions by unaccountable management employees at CalPERS, tax payers have ended up holding the bag.

In 2011 a half hearted attempt was made to fix the problems of the CalPERS and CalSTERS pension funds.  The state placed new hires in a  less lucrative defined benefit plan and tried to end the practice of pension spiking where the last years of an employee’s service,  higher  earnings are used  calculate  more  lucrative pension benefits.

Given what had transpired, one would think public employee unions would realize they had a good thing going and no try to kill the golden goose.   But instead they have filed lawsuits in the courts to try to nullify even these modest reforms of 2011.

Currently there are three cases of these types pending in the California Supreme Court.  If they do not go well, tax payers will likely have to make up the difference if CalPERS can’t deliver the benefits promised retired public employees.

The sh-t has already hit the fan. Budgets of cities and counties throughout California have seen their liabilities go up while at the same time their contributions towards present and past employees has continued to climb.  This along with fewer tax dollars being returned to the communities after Jerry Brown did away with Redevelopment at the start of his third term has resulted in budget deficits for those affected.

To remedy fewer dollars being available to perform essential services and new mandates handed down by the State, little choice has been given other than to raise local sales taxes to make up the difference. Virtually every city and county in California has had to fork over additional money to make up the shortfall either directly or indirectly

And now we are finding that these sales tax increases of the past decade are not enough.   Larger contributions are being asked for to make up for the shortfall.  In the next 3 to 5 years local government will be asked to reach into their increasingly empty pockets once again to fund the money pit in Sacramento.

So what can the citizens of California do fix the disparity of benefits public employees receive that don’t even remotely resemble what is offered in the best pension plans in private enterprise. Here are a few ideas on the to do list:

  1. Start getting much tougher in negotiations with the public employee unions. This goes for everyone from civil service workers to teachers, fire fighters, and police.  It must be made clear that “we value your service but just can’t pay for all of what you are presently receiving.”
  1. If public employees want to keep their present benefits, they must contribute the extra dollars to make up what is owed CalPERS no matter how high that cost might be. This burden cannot continue to all on the backs of tax payers.
  1. End pension spiking completely. This can be partially taken care of by calculating

Pensions on base pay, not on overtime which is often the case with law enforcement and with fire fighters.

  1. Limit the amount of pensions that can be received to no more than 1.5% per year. This is especially true for public safety workers.
  1. Increase the age for when retirees can receive pensions to at least 55. This would assist with reducing pension costs caused by recipients living to any older ages than in previous times.
  1. Reduce the size of pensions to a set amount not to exceed $ 100,000 per year.
  1. Eliminate all double dipping where retired employees can start a new pension program. This is especially true with law enforcement/Fire fighters who retire after 20 years and get a job with another governmental agency.
  1. Reduce medical benefits and even eliminate other for pensions that exceed amounts where there is plenty of income to pay for those services. As an example, someone getting a pension of $125,000 per year can pay for their own healthcare.
  1. Change pensions altogether from the CalPERS model to a 401K system used by private enterprise. Under such a program tax payers would be protected from fulgurations in financial markets and would cease to have the liabilities currently in place.
  1. If public employees are unwilling to make these sacrifices, they should laid off and replaced by new workers who are willing to be employed under the new system. Ronald Reagan’s strategy of dealing with striking airport controllers should be emulated.

These ideas might sound a bit Draconian but unless something is done quickly, the State of California will find itself faced with Hopson’s choices of taking care of its employee’s exaggerated benefits packages versus the overall well being of its citizens. Given these alternatives there is little choice but to give priority to the needs of today.

Where does one start?  The first thing that should be done is stop rubber stamping the lections of Progressive Democrats who continue to thumb their noses dealing with the current pension crisis.  I just wish that elected statewide officials in California would concern themselves as much with real pension reform compared with their obsession monitoring restroom usage, eliminating fast food wrappers, and protecting Sanctuary City’s.

On second thought it is probably asking too much out of a bunch of progressive lunatics to expect them to act in a practical manor. So let me and Howard Beale fade into the sunset being “mad as hell” having no one around to listen to our well reasoned gripes.

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.