At a League of California Cities event in Sacramento, Gov. Jerry Brown promised local officials struggling under the weight of pay and benefit costs that he would, indeed, put forward pension-reform proposals in the coming weeks. Yet I see little evidence so far that the new governor is interested in significantly reforming the underfunded and overly generous pension plans enjoyed by public sector union members.
“It’s going to be a continuing process as we understand exactly what the stock market provides and what the stock market doesn’t provide,” Brown said at the meeting, according to Business Week. That’s hardly a resounding call for pension reform.
By his actions so far, Brown appears not to be serious about pension reform. At his recent news conference announcing his budget, he punted on pension reform, which is probably the biggest financial mess facing the state. Reporters asked about that and, in his typically ornery way, he suggested that we go to his website and look at his plan. That plan isn’t bad, as it calls for an end to pension-spiking abuses, a two-tiered system with lower benefits for new employees, an end to retroactive increases, an increase in employee contributions, and some good-government reforms to increase oversight of retirement systems such as the scandal-plagued California Public Employees’ Retirement System.
There’s a huge difference between including something in a campaign website and including it in a budget. Marcia Fritz, president of the California Foundation for Fiscal Responsibility, recently told a group of anti-tax activists that she gave Brown a list of several minor things he could do to save money on pensions. Yet he chose not to include any of these things in his budget. Fritz is an auditor, and when she audits companies she said that she looks for little things to know whether the company is serious about getting its books in order. Looking at these little things, she is convinced that Brown is not serious about pension reform.
For instance, she suggested that the administration change the way Cal Fire wants to include planned overtime as part of its pensionable benefit package. CalPERS is about to retroactively increase these pension benefits — and Brown could easily stop this. The prison guards, whose members can retire at age 50 with large pensions, also receive an additional 401(k) program, which could easily be stopped. Fritz also pointed to a loophole that allows public school teachers who work part time through job sharing to earn full retirement credit for their time. She also suggested changes to the state’s absurd airtime purchases, whereby public employees can pay for enhanced retirement benefits at about 50 cents on the dollar. “Not a single one made it into his budget,” she said. “He didn’t try very hard.”
Fritz also noted that Brown’s education funding plan doesn’t even mention that the California State Teachers Retirement System, in changing its actuarial rate assumption from 8 percent to 7.7 percent, has doubled its pension liability. The state is vastly underfunding teacher pensions, and contributions need to go up — but Brown avoided the issue, by pretending in his budget that the system is funded adequately. That’s a $4 billion issue.
Is Brown a real reformer or a phony? The answer will come when he unveils his pension-reform proposals.Steven Greenhut is editor of www.calwatchdog.com; write to him at firstname.lastname@example.org.