The pension clock is ticking
It’s the norm in January: After the governor proposes a new budget and delivers his State of the State address, legislators slide into hibernation until spring.
Oh, there’s some rustling around in the dens — a few committee hearings, brief floor sessions — but no strenuous activity, no risk taking until May, when deadlines sprout and the governor revises his budget proposal.
Not every year follows that pattern — last March, the governor and the Legislature made sharp spending cuts — but winter 2012 has all the signs of the rhythmic long nap.
So it’s not surprising that there seems to be a look of lethargy among legislators concerning the sensitive issue of public employee pensions.
We’re being told to be patient. Pension reform will happen. This year.
“It has to,” says Senate President Pro Tem Darrell Steinberg (D-Sacramento). “And it will. The public expects it, first of all.”
And, the Democratic leader adds, “it’s going to be an important part of convincing the voters that we’ve done everything reasonable we can to help deal with costs.
“Sometimes an issue is used as a wedge for political purposes, but it’s a legitimate issue nevertheless. It’s amazing how political the issue of public pensions has become.”
Over the last decade or two, companies butchered pension plans while many governments boosted theirs outrageously. That led to inevitable outcries of unfairness by private-sector taxpayers. Also, government pension plans face unfunded liabilities reaching into the hundreds of billions, depending on the study. So that’s a time bomb ticking for taxpayers.
The nonpartisan Field Poll reported last month that an increasing number of California voters are viewing state and local government pensions as “too generous” — 41%, compared with 32% two years ago.
Another nonpartisan poll, by the Public Policy Institute of California, found that even government workers — nearly two-thirds of them — think that they should contribute more to their pension systems and that new hires should be provided only 401(k)-type plans.
Actually, through collective bargaining, state and local pension plans are starting to be rolled back for future hires, and current employees are contributing more to their retirements.
But practically everyone in the Capitol knows a major overhaul is needed because the current system is not sustainable fiscally or politically.
“There’s a desire to do it and get it over with,” Steinberg says. “But it’s going to take several months of sustained work to drill down below the ideology and easy sound bites and to actually analyze what the various options mean…. I’d like to get this done before the budget.”
The constitutional deadline for the Legislature to pass a balanced budget is June 15.
Gov. Jerry Brown has proposed a 12-point pension overhaul, but seems to be telling legislators to take their time — a dangerous suggestion in Sacramento.
“When we’re dealing with a 40-year matter,” the governor told a legislative hearing on pensions last month, “you don’t have to deal with it in 40 minutes or 40 days or even 40 months. We have time here.”
Not much. And certainly not 40 months if Brown wants to showcase pension reform as he urges voters in November to approve his proposed tax increases.
Brown said as much at the same committee hearing. “We have a lot of things coming up in November,” he reminded Democrats. “We’ve got to win the confidence of the people.”
He called the current pension system a Ponzi scheme.
Brown’s plan would force most current public employees — state and local — to pay more toward their pensions. It would trim retirement benefits for future employees. They’d receive a hybrid mix — a reduced pension plus a 401(k) — and their retirement ages would be raised.
Trying to change pension plans for current workers would be challenged in court. State and local government employees have constitutional protections not available to private sector workers.
A conservative group hopes to qualify a more sweeping pension overhaul for the November ballot. But it hasn’t decided yet between two possible proposals. And it isn’t close to raising enough money to collect the needed voter signatures.
So that outfit isn’t putting any pressure on the Legislature.
Brown didn’t apply much, either, in his State of the State address, mentioning pensions only briefly toward the end.
“Examine it. Improve it,” he said of his plan. “But please take up the issue and do something real. I am committed to pension reform because I believe there is a real problem. Three times as many people are retiring as are entering the workforce. The arithmetic doesn’t add up….
“Benefits, contributions and the age of retirement all have to balance. I don’t believe they do today…. So we have to take action. And we should do it this year.”
A joint Senate-Assembly committee will meet Wednesday to discuss various hybrid ideas. Then the committee will meet in another month to write a report — maybe some actual bills — according to the co-chairman, Assemblyman Warren Furutani (D-Gardena).
“Until we have some sort of [bill] language, we don’t have anything,” asserts a Republican vice chairwoman, state Sen. Mimi Walters of Laguna Niguel. She introduced a bill similar to Brown’s proposal last year and it wasn’t even granted a hearing.
“I don’t think Democrats are willing to do much of anything” because of union resistance, she says. “They may do a couple of tweaks.”
Furutani says the Legislature should “make small surgical fixes now with a scalpel rather than waiting until it becomes a big political brouhaha and people come at it with meat cleavers and sledge hammers.”
It’s a big brouhaha right now. And slumbering through it would look very ugly to already angry voters.
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