Democrats Give California Cosmetic Pension Reforms

Last week the California legislature voted for pension reform. In doing so, the Democratic Party announced they had passed sustainable pension reform. The Democratic Party now thinks they are entitled to ask voters to pass Proposition 30, which would increase taxes in order to “save our schools”.

The real problem remains; California public pensions have a half of a trillion dollars in unfunded liabilities and the pension reforms passed last week only save this state $30 to $60 billion over the next thirty years.

This reminds me of the story where a man had engine problems and the mechanic refused to fix the engine but insisted upon re-upholstering the leather seats. Everyone knew that the car needed a tune-up and that the mechanic was fully capable of taking care of the car. However, the mechanic refused to properly maintain the car because his friend owned the leather shop and the mechanic received a kickback every time he re-upholstered someone’s seats.

The moral of the story is that re-upholstering the seats does not fix a car’s mechanical problems.  In the same way, minor cosmetic reforms do not cure a deeper unfunded public pension problem.

To be fair, Assembly Bill 340, Public Pension Reform, did address a few necessary areas.  The bill ends the “spiking” of wages where employees are given big raises at the end of their career to inflate pensions and the bill also raises the retirement age. These areas will bring cost savings.   A few of Governor Brown’s original 12-point plan passed, but most did not.  One point I was hoping would have passed was a 401(K) hybrid approach to reducing the cost of pensions.

After reading the bill, I noticed a recurring sentence. “Beginning January 1, 2013, new employees” reveals why the present problem is not solved.  New employees will have benefits capped and will pay one half of the cost of their pensions. While I am all for saving money, in order to have sustainable pension reforms, the voters of California need to be able to amend the Constitution to fix the public pension problem on public employee’s unearned future benefits.

When asked if the pension reform bill will be a lot of help, Chris Burdick, a pension reform expert, said “No.”   

Governor Brown’s other motive for “pension reform” was to persuade the voters that Sacramento is working to make the state solvent once again. Sacramento has a well-deserved reputation for back room dealing, lack of transparency, and political pay backs.  Governor Brown is hoping that with this gesture of reform we will all feel good, forget the sordid past, and vote for his proposed tax hikes so that the Boondoggle Train and other pet projects like the water tunnels channeling water to Los Angeles can be funded. I do not see Proposition 30 and pension reform as related in any way. While the pension reform is a start in the right direction, I still am opposed to Proposition 30.

It is time for the California legislature to become serious about solving some of California’s financial problems. California has the lowest credit rating at A-, (13 states have a perfect AAA credit rating). California is losing 4.9 Corporations each week to other states. California is experiencing 20.3% unemployment/underemployment. California has a $500,000,000 unfunded pension liability. Now the Democratic leadership thinks that their attempts to put a Band-Aid on gangrene should entitle them to be entrusted with more of your money. I think not.

Mark Meuser is a candidate for State Senate District 7. You can follow him on Facebook.