A few years ago, the California Public Employees’ Retirement System’s chief actuary gave what he assumed was a private briefing and described the huge system’s liabilities as “unsustainable.” A journalist who heard the briefing published an account, thus letting everyone else in on CalPERS’ secret.
Officially, of course, the union-dominated CalPERS still contends that its unfunded liabilities are small and it can finance pensions for millions of government retirees and their families, now $20 billion a year, with, at most, only minor tweaks.
However, outsiders who have independently examined state and local pension systems have raised red flags about potentially hundreds of billions of dollars in unfunded liabilities.
Even union-friendly big-city mayors, facing rising pension costs and major budget deficits, are calling for systemic changes, echoing that now-former CalPERS actuary’s warning about long-term consequences of doing nothing.
Gov. Jerry Brown, who was elected with critical union support last year, weighed in Thursday by proposing a 12-point pension reform plan that could, if enacted, significantly mitigate those consequences. And he used the same word — “unsustainable” — to describe the pension dilemma.
His plan includes higher contributions from employees, higher retirement ages, tightening of retiree eligibility for health care and a partial shift to a 401(k)-type defined-contribution plan.
Union officials immediately denounced it, saying, in effect, that they had already agreed to some minor changes in pension benefits and that’s enough.
All of which raises this question: Is Brown serious, or is he throwing up something that technically keeps a campaign promise, but that he knows will be trashed by Democratic legislators utterly beholden to the unions?
Legislators could take cover in the unions’ position that “we simply cannot stand for imposing additional retirement rollbacks on millions of workers without bargaining.”
However, the 1999 bill that hugely increased state pensions was rushed through the Legislature without even the veneer of collective bargaining.
In fact, the state’s largest union, the California State Employees Association, declared in a 1999 memorandum that “retirement benefits are not part of the Dills Act [and] CSEA should not be required to bargain for retirement benefits when the money for these benefits is coming from the Public Employees’ Retirement Fund and not state coffers.”
Only Brown, who loves political chess, knows for certain whether pension reform is something he’s willing to go to the mat to accomplish, or just a sacrificial political pawn.
But on last week he listed at least a half-dozen other issues he deems more pressing, and his actions will speak louder than words.
Dan Walters’ Sacramento Bee columns on state politics are syndicated by the Scripps Howard News Service.