Assemblyman Warren Furitani and Senator Gloria Negrete McLeod chair the State Legislature's conference committee on pension reform
Earlier this month, the Ventura City Council unanimously endorsed a call for the California State Legislature to enact “meaningful pension reform now.” It was immediately endorsed by an editorial in the Ventura County Star which called on “city councils in other cities in Ventura County to take the same action.”
It’s hard to ignore the drumbeat. As the Star editorial noted, “without waiting for state action, voters in San Diego and San Jose — the state’s second- and third-largest cities — passed measures in June to overhaul their pension programs.” In the last month, three California cities have voted to file bankruptcy and more are teetering. While long-term pension liabilities are not the cause of these municipal insolvencies, the desperate fiscal plight of more and more local governments adds urgency to calls for long-term pension reform. And as the big statewide pension plans report their dismal earnings records in the slowing global economy, the numbers only get worse.
Yet Legislators continue to stall. To be fair, a Conference Committee of Assembly and Senate members apparently did hammer out a proposal, although they refused to make it public. Instead it went to Governor Jerry Brown who insisted it fell short of meaningful reform. “The governor could not agree to some of the changes in the pension counter-proposal shared by the Legislature on Sunday,” his spokesman, Gil Duran, was quoted as saying, “These complex issues cannot be resolved in two days, and he has asked the Legislature to continue to work with him over the recess to resolve the substantial differences.”
It’s true that complex issues can’t be resolved in two days, but it has now been nearly nine months since the Governor proposed his 12 point pension reform plan, surely a long enough gestation period. Instead, it will wait until the Legislature returns in September.
Or maybe not even then. In calling for action now, Ventura’s City Council was voicing the widely held concern that the issue will be ducked entirely to avoid antagonizing labor support for the Governor’s tax package on the November ballot.
That could be a huge mistake. Not only does a failure to deal with pension reform jeopardize voter confidence in how State government will spend a tax increase if they approve one, it undermines long-term retirement security for the people that statewide employee unions represent. There are two alternatives to sensible reform along the lines proposed last October by Governor Brown, neither of them pretty. One is a much more radical attack via initiative that would strike at the very heart of public sector pensions for current, future and even past retirees. The second is long-term insolvency for California pension systems and the agencies that fund them. The votes in San Jose and San Diego show the potential for the former. Actuarial projections show the dismal likelihood of the latter.
As Ventura’s City Council emphasized, we all have a stake in sensible pension reform. It may not seem to be in the immediate self-interest of government workers to take less. But the fates of Vallejo, Stockton and San Bernardino dramatize the perils of waiting too long to put your fiscal house in order.
Ironically, one excuse offered by State Senate President Darrell Steinberg for postponing consideration of pension reform this month was to ensure successful passage of the first stage in the State’s high-speed rail system. In signing the controversial package, Governor Brown dismissed critics as short-sighted about long-term commitments. “We are in a culture of immediate gratification — me, now, easy,” Brown said. “This is about us, long and difficult.”
He’s certainly right about our current political and social culture. Pension reform may be long and difficult, but is clearly about us — all of us. Time for the Legislature to recognize the urgency of this long-term challenge — and put us on track toward long-delayed, common sense solutions.
{ 3 comments… read them below or add one }
As a member of the Ventura City Compensation Task Force I (and the other 2 public members) felt strongly that the only real salvation to sustainable pension plans is to abandon the Defined Benefit Plan system and adopt a Defined Contribution Plan in any way possible.
The perfect storm: Assume that there is a cure for cancer and life expectancy zooms to 90 or even 100 years, AND investment rates fall to below 5%, AND COLA rates increase as well
With current Defined Benefit Plans every city in the State would be in jeopardy.
I respect your view, Bart, but I’m not sure you speak for all three of the public members. Although there was never a vote on the matter (to implement your proposal would require buying out of the CalPERS system) I don’t recall Ed McCombs calling for a switch to “defined contributions.”
I agree with you that “current Defined Benefit Plans” put every city in the State in jeopardy if cancer is cured and investment returns languish for years. Leaving that “perfect storm” scenario aside, there’s an urgent need to revamp “current Defined Benefit Plans” to address their underfunding under current realities, not just future assumptions. I’m pretty sure you’d agree with that.
It’s the same old drumbeat. Some things never change. Folks hear something said often enough and decide it’s worth believing. No individual thought. No research. It’s doubtful they even know what defined benefit is … present company excluded, supposedly. Well here in layman’s terms is precisely what it is. It’s a mechanism that allows someone who labored for a living wage all of his or her working career to retire with an income that no one can snatch away by pulling the rug out from under them. How it actually works is immaterial. It does work and it’s the moral thing to do.
Contrast this with the big lie that hides behind names like “Individual Retirement Account,” or “401 (k),” otherwise known as “the big gamble” — or if you like, the “game” between winners and losers. That’s what legalized gambling is, of course. Say it slowly, and with feeling this time — the game between winners and losers. For every winner in the Stock Market there must be, of necessity, 100 or more losers. Without losers there could be no winners. Just ask any casino operator how long he’d remain in business if it were 100-to-one or even 10-to-one in the other direction. Remember, it’s always someone else who wants defined contribution for you, but defined benefit for themselves.
And so to all you folks who are of the opinion that you’ve been put “in charge,” gamble with your own future — not that it would ever happen — and think about the real implications of finding a cure for cancer, not the imaginary ones. It’s doubtful very many would come to the conclusion that we as a nation can’t afford the after effects.
And just one more thought. If you don’t know what’s wrong with this country, you’re not watching the commercials on television.