Assembly Member Bob Wieckowski (left) congratulates fellow member Warren Furutani after passing the Pension bill (Assemblymember Das Williams is in the foreground). Photo: Susana Bates, Special To The Chronicle
Yesterday’s Ventura County Star carried a skeptical Associated Press account of the bipartisan pension reform adopted overwhelmingly by the Legislature late last week. It makes the case that “while (Governor Jerry) Brown and Democratic leaders hailed the deal as sweeping and substantial, the governor failed to get critical elements that he previously said were needed to better protect taxpayers for years to come.”
The critics have a point, yet the positive progress should not be overlooked. Republicans, who were largely excluded from the deal making, had every incentive to embarrass Governor Brown ahead of the November election. Yet they lined up behind the package which passed the Assembly 50-8 and the Senate 36-1. GOP leaders said the deal didn’t do far enough, but they acknowledged it went a long way in the right direction.
As advertised, the approved bill will scale back future retirement benefits by tens of billions in the decades to come. What it doesn’t do is ensure our existing obligations are sustainable.
That’s hard to do for two reasons. First, the obvious political challenge of Democrats colliding head on with public employee unions, which are among their strongest backers. Second, the legal reality that California courts have consistently protected existing pension commitments as unbreakable contracts.
With just three days left in the Legislative session, Governor Brown announced a compromise reached with fellow Democrats in the Legislature.
So the compromise measure does ratchet up the contributions made by existing employees to fund future benefits. It does so over the next five years. While local government agencies will have to actually negotiate with employee unions to achieve these savings, the law gives them added legal leverage — besides the overwhelming fiscal realities.
The League of California Cities has long argued that reform was necessary to stave off twin draconian threats to a retirement system that has worked for more than seven decades. The first danger is a massive default as cities eventually have to choose between current services and paying past retirement claims. Union advocates for the current system argue that the problem is not with the benefits, but with the meltdown of the stock market which opened a gaping hole in the expected returns on investments. That’s true in part, but retirement benefits that are dependent on a constantly booming stock market are sustainable only in a dreamworld.
The other dire threat is that the public becomes so angry at perceived abuses and rising costs that they toss the whole system overboard. Almost no private sector firms any longer provide the kind of solid retirement security that “defined benefit” plans offer. Most taxpayers don’t begrudge public employees that benefit — but they aren’t going to sacrifice existing public services to pay for it. With massive unfunded liabilities from the Great Recession’s market losses, there aren’t any other options besides employees contributing more or taking less.
“Shared sacrifice” isn’t very popular these days. What’s popular instead is identifying villains and insisting they be the ones sacrificed. The political left often demonizes bankers, corporations and the wealthy, arguing they should simply pay higher taxes to close gaping fiscal gaps. The political right frequently bashes public workers and the poor, arguing for slashing public programs that benefit the poor as well as slashing the compensation of public employees.
For California to regain its luster, working across these polarized lines is essential. Whatever its shortcomings, the pension reform package did just that. Give Governor Jerry Brown credit for a big step forward in a journey that will need to continue. “Shared sacrifice” may not get applause at party conventions — but it is vital to ensure a sustainable future for California state and local services. It’s equally crucial to ensure reliable pensions for the people who devote their careers to providing those services to us all.