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Public pension reform, not public-worker bashing

We'll never achieve an equitable and effective fix to the very real problem of unsustainable public pension obligations until we dispel the miasma of non-facts enveloping this highly fraught topic.

May 15, 2011|Michael Hiltzik

Typically they were extracted by public-employee unions from Democratic administrations and legislatures, especially when the dot-com boom made the state budget look flush and the enhancements look free. Everyone pretended that the boom would last forever, including, shockingly, CalPERS actuaries — public bodies even were permitted to forgo contributions to the system during the fat years, which only made things worse when the market crashed. The pols perceived that public employees were a potent voting bloc, but of course one thing that makes them so is that so many other Californians sit on their duffs on election day. If you're one of the nonvoting masses, you're to blame for the pension fiasco too.

For years political leaders, union representatives and voters ignored the gathering clouds. No more. "You're seeing signs of movement," says Marilyn C. Brewer, a former Republican assemblywoman from Irvine who as a member of the Little Hoover Commission spearheaded that independent government watchdog group's remarkably clearheaded analysis of the issue, published in February. "The state's dire financial situation will push it forward." Recent changes have reduced the benefits for new employees, but in many ways they're still superior to what's available on the outside.

Finding a path through these brambles isn't made easier by today's craze for public-worker bashing, which is partially an artifact of the outrageous trend toward more income inequality in California and the U.S. alike. According to Franchise Tax Board figures, more than 70% of the $300-billion increase in total adjusted gross income of California taxpayers between 1987 and 2008 went to the wealthiest 10% of Californians. The middle 20%, our valiant middle class? They got 3%.

This is connected to such phenomena as the decline of collective bargaining in the private sector, increased job insecurity and the explosion of household debt. Government workers are seen by the average strapped taxpayer as insulated from these pressures (public employees don't help themselves by engaging in scams like "spiking" their final years' pay to pump up their pensions), but the resulting resentment is the ultimate class-war victory of the haves over the have-nots. Middle-class taxpayers grouse about the retirement deals of teachers and DMV clerks, while bankers and CEOs, whose compensation and tax breaks really deserve public obloquy, slink away scot-free.

One can mourn the decline of traditional pensions in the private economy but still acknowledge that California public pensions are out of line by customary standards. It won't be easy to reverse the trend, but it's not impossible. The right place to start is with the Little Hoover Commission's recommendations. These include giving state and local governments the authority to change unaccrued future benefits for current workers, by a constitutional amendment if necessary; capping the maximum salary factored into the pension formula or capping pensions; shifting a portion of the pension to defined-contribution plans, which are less risky and expensive for the employer; and partially offsetting teacher and public-safety pensions with Social Security.

The mistakes of the past should be red-tagged: No pension contribution "holidays," ever again. No retroactive enhancements. Increases in the retirement age for most workers from 55 to 60 or 65. Voter approval of all pension increases.

The Little Hoover Commission's guiding principle is that public pensions should be restored to the original role of providing for an adequate and humane lifestyle after retirement, not for creating wealth for a few at the expense of all Californians. It's the right course. Turning the state into a hollowed-out shell is bad for everyone.

Michael Hiltzik's column appears Sundays and Wednesdays. Reach him at mhiltzik@latimes.com, read past columns at latimes.com/hiltzik, check out facebook.com/hiltzik and follow @latimeshiltzik on Twitter.

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