Maybe We Can Touch Pensions

Steven Greenhut: In most pension discussions here in California, opponents of pension reform — the state’s dominant Democrats and the public sector unions, which basically run the Capitol — argue that no reform can touch existing benefits. But a new column by pension reporter Ed Mendell suggests that it may be possible to touch those benefits. Writes Mendell: “Two charter cities, San Diego and Pacific Grove, are taking action that could shift more of soaring pension costs to employees, and a law firm that specializes in employee benefits says local governments may have ‘more latitude’ than they think to cut costs.”

That’s potentially good news. Something has to be done about existing costs. The thinking so far has been that once a city council, a board of supervisors or the state Legislature grants additional benefits, those benefits must be paid for 30 years or more. This is very convenient. It protects current employees and retirees from any benefit reductions on contribution increases. But it also puts the state in a box. The estimated half-trillion-dollar unfunded pension liability in California is from current employees and retirees. It will take years before reforms for new hires show any real savings.

In fact, legislative Democrats have argued in opposition to a new pension tier for state employees by saying that the new tier won’t make much of a fiscal difference for years any way. Most of us would think that’s an argument for deeper reforms, but in the state Capitol that’s the argument used to oppose any reforms.

Orange County is continuing its lawsuit challenging the retroactive portion of a 2001 pension increase for deputy sheriffs, claiming that retroactive benefits are an unconstitutional gift of public funds. This sort of challenge to the status quo is desperately needed.

Per Mendell, “The conventional view is that the courts have ruled that once an employee is vested in a public pension, the benefits are a contract that cannot be cut. So pension cuts are usually limited to new hires not yet vested in the plan. But a law firm in Folsom that specializes in employee benefits argues, after taking a close look at court rulings, that governments may be able to make reasonable reductions in pension benefits not yet earned, particularly if needed to preserve the pension system.”

This is where things have to be headed. Otherwise the only options are massive cuts in services or financial crisis.

DEC. 7

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  1. John Seiler
    John Seiler 7 December, 2010, 18:38

    That’s an important development.

    But we also need to cut pensions for those who already have retired. Retirees don’t deserve any more money from taxpayers, only what is vested in the pension fund.

    And I don’t care what their contract said. I never signed it.

    Reply this comment
  2. John Gardner
    John Gardner 8 December, 2010, 12:55

    This is NOT a new development. It has been the law for years. Vested benefits are those which have actually been earned right up through TODAY. The formula for future service, even future service of current employees, can be changed effective tomorrow.

    People don’t know this because public “intellectuals” such as columnist Dan Walters have been misinforming them for years — despite having been informed for many, many years that what he is saying is simply wrong.

    Pension benefits actually being paid are a different matter, of course. So, “already retired” are, under federal law, protected.

    Reply this comment
  3. Bob Carey
    Bob Carey 19 December, 2010, 01:07

    So “.. a law firm in Folsom that specializes in employee benefits argues,…..”

    This is not the sort of solid logic that warrants your speculation. You are trying to make an argument for substantial legal expenses by public agencies when the likelihood of success would not justify those expenditures. “A law firm in Folsom …argues..” does not an argument make.

    Reply this comment
  4. Buck Tyurgenson
    Buck Tyurgenson 28 December, 2010, 11:07

    Bob Carey above is correct—-

    Reply this comment
  5. moxy
    moxy 21 February, 2011, 21:45

    The Chang, Ruthenberg & Long, PC law firm is posed to make lots of money in its future working pension lawsuits which are unlikely to prevail. This law firm will certainly profit in a big way at the expense of the taxpayer.

    Reply this comment

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