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Gov. Brown's proposed tax increase? Yes, it's about pensions too

Despite his earlier rhetoric, the governor gets that Proposition 30 is not just about paying higher taxes; it's about pensions, parks and perceptions.

August 29, 2012|George Skelton | Capitol Journal
  • Gov. Jerry Brown speaks about pension reform Tuesday in Los Angeles.
Gov. Jerry Brown speaks about pension reform Tuesday in Los Angeles. (Brian van der Brug / Los Angeles…)

SACRAMENTO -- What Gov. Jerry Brown said recently about his proposed tax hike was complete balderdash. And I'm betting he was the first to know it.

He is not ordinarily delusional, after all.

The wily old politician proved that his comment was hogwash Tuesday when he flew to Los Angeles, the state's biggest media market, to trumpet a new legislative compromise aimed at controlling public pension costs.

Brown had proclaimed that his soak-the-rich tax initiative on the November ballot was not about pensions or scandals or anything else except forcing the wealthy to pay more to avoid draconian cuts in education funding.

This is what the testy governor told pesky reporters Aug. 15 as he kicked off his campaign for Proposition 30, which would raise the sales tax slightly for everyone and the income tax sharply for individuals making more than $250,000 and couples earning over $500,000:

"This is not about any other issue. It's not about the environment, it's not about pensions, it's not about parks. It's about one simple question: Shall those who've been blessed beyond imagination give back 1 or 2 or 3 percent for the next seven years, or shall we take billions out of our schools and colleges to the detriment of the kids."

OK, technically, he's correct. On paper. From a policy standpoint.

But from a political perspective and looking into the minds of many voters, the question is about much more. It's about whether they should send Sacramento more tax money. It's about how the politicians have been spending what they've already got and whether they can be trusted with billions more.

Part of that equation is the state parks department hoarding $54 million while planning to shutter parks, the governor embarking on an unpopular $68-billion bullet train project with only $13 billion in funding identified — and seemingly uncontrolled state and local public pensions while private pensions have been practically eliminated.

So Prop. 30 is not just about paying higher taxes; it's about pensions, parks and perceptions.

Brown obviously gets that, despite his rhetoric.

It's why, to his credit, he pushed Democratic legislative leaders into compromising on a pension deal, which the Legislature is expected to pass before it adjourns by midnight Friday.

The compromise isn't all that reform advocates wanted. But it's more than public employee unions ordinarily would have tolerated.

The unions are backed into a corner at this moment, fighting with one arm tied.

They know that some meaningful pension change is necessary to gain voter approval of higher taxes and — even a bigger priority — rejection of Prop. 32, which would cripple unions by making it far more difficult to collect political money from members.

Beyond that, unions are leery of local initiatives that would roll back city pensions, such as recently won voter approval in San Jose and San Diego.

Fortunately for Brown, labor slammed the pension proposal, helping him to sell it as credible.

"We are outraged," declared Dave Low, chairman of a coalition representing 1.5 million public employees and retirees. He accused Brown and Democrats of "taking a wrecking ball to retirement security."

From the other side, Brown was aided by the business community, which generally lauded the pension deal as a good first step. The California Business Roundtable praised the governor "for his unwavering commitment" to reform.

So the compromise should pass the laugh test.

"It's not everything Brown asked for, but he can call it pension reform with a straight face," says Dan Schnur, a former Republican strategist who is director of the Jesse M. Unruh Institute of Politics at USC.

"It'll help a little bit. He still has got to deal with high-speed rail and the parks scandal, but this was the biggest boulder in his path."

Darry Sragow, a veteran Democratic strategist, calls it "a major step in reassuring voters that government is not wasting their money — and a message that the governor is addressing their concerns."

Brown fell short of getting all that he proposed. But that's the democratic process in a government consisting of two equal branches.

The governor had proposed that the current pension system be eliminated for future employees. He wanted them only to receive a hybrid mix of a reduced pension and a supplemental 401(k)-type plan.

But, according to legislative leaders, Brown never could figure out how to make the hybrid system work while guaranteeing that potential retirees would never lose money because of economic slumps.

Well, ask any private sector worker. That can't be guaranteed.

Democratic legislators wouldn't buy the hybrid notion, Senate leader Darrell Steinberg (D-Sacramento) told me, because "we believe in middle-class retirements. We don't think people should have to rely on just Social Security and 401(k) plans."

"Our effort as a state and a society ought to be to fight for defined benefits for the private sector as well."

Don't hold your breath waiting for that fight.

One major feature of Brown's compromise, for new hires, would cap incomes on which pensions could be based at $110,000 for Social Security recipients or $132,000 for retirees not entitled to Social Security. That's designed to eliminate $100,000-plus pensions.

Retirement ages also would be raised and, in many cases, benefits reduced.

And both current and future employees would have to pay half their retirement costs.

Not affected would be charter cities such as Los Angeles or the University of California. They have their own pension systems that could be scaled back, however, by a state constitutional amendment.

Brown's compromise is all that's currently possible. Still, it's a major achievement — good policy and must politics, closely tied to the governor's tax hike. Despite what he claims.

george.skelton@latimes.com

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