The pension haves vs. the have-nots

Capitol Journal

Beyond government budget jitters, there is a much bigger dynamic at play in the far-flung battle over public pensions.

It goes beyond even anti-union hate, non-union envy and union gluttony.

These are all key motivators in the pension tussle that has been brewing for years in Sacramento and the current all-out, anti-union attacks in Wisconsin, Ohio, Indiana and other states.


But they’re merely a symptom, it seems to me, of a gradually declining lifestyle for working stiff Americans — blue and white collar, college educated or not. Except for the super-rich, our financial well-being has become chillingly shaky in the global economy and downright scary during the great recession.

There’s cheap labor overseas and job-killing technology at home.

Private-sector workers have been taking it on the chin for a decade or more: Future pensions frozen for current employees and eliminated for new hires; retirees at the mercy of risky 401(k) plans and Wall Street. Plus layoffs and elimination of retiree health benefits.

Now it’s the public sector’s turn to suffer, in the eyes of many in private enterprise. It’s sort of an American civil war between government and non-government families.

“A key question that we think needs to be asked,” Assistant Legislative Analyst Jason Sisney said in a recent report, “is this: Can the substantial disparity between public and private sector retirement benefits be sustained much longer? We think that it probably cannot.”

Presumably he was referring to sustaining the disparity fiscally. But it also cannot be sustained politically.

A statewide poll in December by Democratic pollster Jim Moore found that 62% of likely voters — including 54% of Democrats — considered “the escalating cost to taxpayers” of public employee pensions to be a “very serious” issue.

In a January 2010 poll by the Public Policy Institute of California, 70% of likely voters — including 61% of Democrats —favored changing government retirement benefits from pensions to 401(k)-type plans.

The legislative analyst has suggested that the state consider adopting a “hybrid” retirement program that would include less generous “defined benefit” pensions combined with a “defined contribution” 401(k).

“In defined contribution programs,” the analyst continued, pointing out something private-sector workers already are painfully aware of, “if the investment returns don’t materialize, that risk is placed on the employee, not on the employer or the taxpayer.”

Actually, free enterprise employees should be rooting for government workers in hopes that at least some retirement security can be retained in America.

Perhaps ultimately it will wend its way back into the private sector. But human nature doesn’t function that way.

You don’t need to be an economist or a psychiatrist to see that Americans are battling over pieces of a smaller pie.

This has been intensifying as the gap between rich and poor has widened.

The state Franchise Tax Board reports that during the two decades between 1987 and 2008:

Inflation-adjusted incomes of the top 10% of California taxpayers increased by 43%; the top 1% by 81%. Meanwhile, incomes of the lower 60% dropped by around 12%.

The income gap doubled between the top 1% and the average middle-class Californian. In 2008, the top 1% enjoyed 39 times the income of the middle class. In 1987, it was about 19 times.

The average inflation-adjusted income of the middle-class taxpayer actually dropped from $41,800 to $36,600.

Political generosity to public employee unions — mainly by Democrats — combined with the ridiculously high salaries and pensions paid to many local government executives, have fueled the public anger and envy.

“Existing benefits of our pension system are very generous,” analyst Sisney notes. “Compared to other states, Californians have typically given their public employees richer benefits in recent years.”

In 1999, the Legislature and Gov. Gray Davis, indebted to unions for his election the previous year, opened the vault to future state retirees, especially public safety workers. That act was largely repealed by the Legislature and Gov. Arnold Schwarzenegger last year, but too late to affect pensions earned before then.

Then we read about city managers and fire chiefs, among others, hauling down pensions well into six figures.

Marcia Fritz, president of the California Foundation for Fiscal Responsibility — a pension reform group — estimates that more than 20,000 public retirees are drawing checks exceeding $100,000 annually.

The poster children for reform are the 36 whining University of California executives who have threatened to sue unless UC honors what they claim is a promise to base pensions on their full salaries, not merely the first $245,000. UC President Mark G. Yudof denies there is any obligation.

Anyone pulling in at least $245,000 annually who can’t set enough aside to live on in retirement shouldn’t be trying to teach anybody anything.

In Sacramento last year, Schwarzenegger negotiated with unions and the Legislature to take some significant steps toward pension savings, including requiring workers to pay more toward their retirements.

Gov. Jerry Brown has promised more but hasn’t begun to deliver.

“We have to be realistic about what the state can afford and put an end to abuses of the system,” the governor says on his website.

But Brown has been holding back, waiting for Republicans to propose trading pension reform for his plan to place a five-year extension of tax increases on a special election ballot. Make it all part of a solution to the chronic budget deficit.

Republicans aren’t budging.

Meanwhile, pension reformers are plotting a ballot initiative campaign for next year.

The Democratic governor and Legislature, along with labor, need to recognize the new economic reality: Private-sector taxpayers won’t continue to pop for pension largesse that they themselves are denied. And Republicans need to get in the game.