Back in 1999 at the height of the dot-com with the state treasury overflowing with money, Assembly Speaker Antonio Villaraigosa joined in a bipartisan move to share the wealth of California.
The beneficiaries were public employees and the vehicle for rewarding them was know as Senate Bill 400, a measure that started out tamely as updating the 40-year-old death benefits plan but became in the Assembly a massive enhancement to pensions for employees of the state, the schools and most local jurisdictions.
With only seven of the 120 legislators in both houses voting no, SB 400 allowed public employees to retire as young as 50 and to get pensions of up to 90 percent of their highest salaries in the case of police and firefighters, or 75 percent for civilians.
It was argued that it would save the state money in the short run and that the cost over time would be no more than $650 million a year.
Over the next two years, even as the boom was turning to bust, the City of Los Angeles got in step with the state with then Mayor Richard Riordan and Police Chief Bernard Parks signing a ballot measure to get LA’s cops and firefighters the same pension deal — support that both have come to deeply regret
“This new funding structure is
projected to reduce the City’s General Fund contribution to the Fire and
Police Pension System by an estimated $196 million over the next five
years,” according to the ballot argument that drew no opposition. “Given current projections, the reduction in General Fund
contributions could continue for an additional five to ten years.”
And so the seeds of destruction were sown.
Today, taxpayers are putting more than $3 billion annually to keep the state pension funds able to pay their obligations with estimates of the total statewide unfunded liability to public employees running as high as $500 billion.
In LA, the payment to pension funds is eating the city budget alive at $j800 million this year and soaring potentially to more than $2 billion within a few years because of an unfunded liability of as much as $17 billion.
Just Wednesday, the governor declared public employee pension reform his No. 1 priority, saying, “”The single biggest threat to our fiscal health and California’s future
is our public pension system. I refuse to pass this crisis onto the next governor or the next
For his part, Villaraigosa announced the city’s “pension system
is no longer sustainable” with benefit costs at 19% of the general fund budget and certain to rise sharply in coming years.
So what do they want to do about it?
Change the law so that new city and state workers get smaller pensions and can’t collect them until they are seven to 10 years older than current employees can.
There are no estimates available of how much these steps would reduce the burden to taxpayers but how much could it be when both the city and state are broke and not likely to be doing much hiring for years to come.
“The city and the state are legally prohibited from taking existing
benefits away from people already on the government payroll or receiving
a pension,” as the LA Times noted today.
Of course, bankruptcy — an option for the city but not the state — could make real pension reform possible, as Riordan is now advocating publicly.
But that would be political suicide for everyone in office so don’t expect your elected leaders to take such an honorable step.
Facing job eliminations and furloughs, public employee unions have shown
no inclination to negotiate new deals on pensions and lifetime health benefits.
Most of us who work or worked in the private sector didn’t have the same protections or rights. The company I worked for half my adult life closed its pension plan more than a decade ago and my wife’s employer just sent out notice her pension plan is being closed, reducing the projected payout to employees by more than half in most cases.
The disparity in wages and benefits between the public and private sectors is tearing our city and state apart. We are at loggerheads with no way out so things will have to get worse, a lot worse, before unions make concessions or a taxpayer revolt bring the situation to a moment of truth.
Services at every level of government are being cut and the cuts will grow deeper year after year because our leaders are papering over the deficits, borrowing against the future, praying for the Obama economic miracle to save us all.
This is insanity We can keep going round and round in circles talking about pension reform and doing nothing to fix it even as our city and state spiral downward into economic decline with all of its consequences. “Doing the same thing over and over again and expecting different results” is how Einstein once defined insanity.
All the talk by our political leaders is nothing more than posturing. Their long-term failure as leaders has left them caught between the public’s refusal to pay more to government and the unions’ refusal to give up anything.
We can go on and on like this. We can keep on shouting the end of the world is coming unless we spend every cent we have to go green. We can keep on warning we need more cops to protect us from lawless gangs and criminals. We can keep on firing teachers and closing parks and libraries. We can keep on denouncing each other and saying “no” to every solution anyone else proposes.
Or we can come to our senses and see where this inevitably leads. It shouldn’t take catastrophe to get people whose lives and fortunes are inextricably tied together to seek the common ground but that’s the way it usually works.