One way or another, California will get public pension reform.
When the governor and every expert who has looked at the books use the word "unsustainable" to describe California's public pension systems, they're not kidding. If the Legislature doesn't fix pensions, the voters will have their chance. And if that doesn't work, the bankruptcy courts may have to do the job.
Public employee unions can spend a small fortune to defeat the plan Gov. Jerry Brown has offered, or they can spend a much larger fortune to ask a frustrated and angry electorate to reject a proposed November ballot initiative that would cap public-agency retirement spending and result in harsher changes for their workers.
If the governor were proposing to slash benefits, it might make sense for the unions to pull out all the stops to defend their members and retirees against his plan. But that's not the case. The governor is asking workers to pay half the cost of their retirement benefits — just like those in the private sector who are lucky enough to work for a company that matches their retirement contributions.
Public employees who don't trust Wall Street can keep much of their retirement savings in the same defined-benefits plan they have now. Those who invest in a 401(k) can direct their money into "green" investments or away from the companies they don't like.
If public employees accept the broad outline of the governor's hybrid alternative, there's not much left to argue about. Government workers will have to work longer before they can retire, but so does everyone else. As to the host of abuses the plan and other proposed legislation targets, I wouldn't want the job of explaining to voters why public employees should be allowed to retire on Friday and report to work on Monday collecting both a paycheck and a pension check. Or why retirees are entitled to retroactive benefit increases. Or why it's OK to routinely spike pensions by raising workers' salaries shortly before they retire. Or why felons convicted of stealing from taxpayers should collect state pensions.
To remove the incentive to take a government job at the end of their careers solely for the purpose of collecting taxpayer-supported lifetime healthcare benefits, the governor's plan requires new employees to work 15 years before the state will pay a portion of their retiree healthcare premiums and 25 years to qualify for the maximum state contribution. And the plan would require retirees to pay at least as much for their healthcare as current employees.
Public employee unions have a chance to show voters that they can work constructively with lawmakers to solve one of California's most vexing fiscal problems. Instead of digging in their heels and throwing money around, they should commit their considerable intellectual resources to finding common ground within the framework of the governor's plan that balances the interests of union members and taxpayers.
If state and local public employees agree to split the cost of their retirement plans with taxpayers, Brown and the Legislature can declare victory and restore some measure of public confidence that government can work. They can ask voters to support higher taxes and fix pensions on the same ballot. Billions of dollars that would otherwise flow to public pensions could support schools, public safety, parks and social services, saving thousands of government jobs. California can gain control of the huge public pension debt our grandkids' grandkids now stand to inherit.
Pension reform won't solve all of our fiscal problems, but it's a giant step in the right direction. The governor's plan is an opportunity for public employees to take that step in unison with taxpayers.
Marcia Fritz is a member of the Government Accounting Standards Board Pension Committee and president of the California Foundation for Fiscal Responsibility. She is a CPA and owns an accounting firm in Citrus Heights, Calif.