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Pay before they go

A state panel has a sensible plan to ease the public employee retirement liability mess.

January 10, 2008

California hasn't been setting aside enough money to pay promised health and pension benefits to retired state employees. Prudently pre-funding those benefits now would divert $1.23 billion from next year's budget, which already has to shed some $14.5 billion just to balance. When you throw in cities, counties, school districts and other public agencies, the unfunded liability reaches $181 billion over the next 30 years, according to a state panel's report on the crisis.

The problem with that gloomy document is that it's simply not gloomy enough. It relies on self-analysis by local governments, many of which leaven their financial projections with prayerful assertions that healthcare costs are bound to taper off someday. The city and county of Los Angeles have been more responsible, but neither has yet fully pre-funded its employee retirement obligations.

The 12-member public benefits commission, chaired by Los Angeles attorney Gerald Parsky, could have packed more candor and courage into its report. The panel avoided a frank discussion of whether California and its local governments can afford to continue offering public employees rich retirement benefits now rare in the private sector. The report presumes that taxpayers must bear the burden of escalating public pension and healthcare costs. It calls for no concessions from the retired, current or future government employees who enjoy the benefits.

The state may have no choice but to pay top retirement dollars if it wants to attract the best university professors or transportation engineers, as Parsky noted. But that doesn't necessarily mean Californians are better off funding early retirement and lifetime medical care for every government clerical worker. The healthcare reform bill brokered by Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nunez (D-Los Angeles), even if it passes, is fully funded and works perfectly, won't get the state out of its public employee retirement liability mess.

But embedded in the report's shortcomings is an important and redeeming plus: The same cooperative focus that kept the panel from treading into sensitive political territory produced an action plan that is not only constructive but achievable. The recommendations based on prudent pre-funding of retirement benefits are pre-screened by commission members representing Sacramento's political factions; the governor's staff and the Legislature can, and should, quickly adopt them.

The tougher conversation about benefits must still take place. In the meantime, the report offers a hopeful glimpse of what Schwarzenegger's era of post-partisanship could yet achieve despite its bitterly disappointing first year.

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