Little Hoover: Cut Current Pensions

John Seiler:

It’s not Wisconsin — yet. But today the Little Hoover Commission released a new report on California pensions that pushed forward the serious cutting of government-worker costs on the state budget.

“Public Pensions for Retirement Security” is 106 pages of well-reasoned analysis of what got the Golden State into a sinkhole of budget trouble — and some reforms that can help get us out.

Little Hoover:

Treated like another speculative house during the boom, the state allowed public agencies and employees to pull equity in the form of increased retirement benefits from the pension funds whose value was inflated by optimistic market return estimates.  The retirement promises that elected officials made to public employees over the last decade are not affordable, yet this is a mortgage that taxpayers cannot walk away from easily.

Right. But Little Hoover calls only for cuts in pensions for the future income of current workers, as well as new hires. I think they didn’t go far enough. Here’s what they say about those already retired:

Pension benefits promised to retirees are irrevocable, as are the promised benefits that current workers have accrued since their employment began.  It also remains difficult to alter the theoretical, yet-to-be earned benefits for current workers.  This situation, reinforced by decades of legal precedent, leaves little room for state and local governments to control mounting retirement costs, particularly when the only venue for change is the bargaining table.

But there’s a problem: There’s no money for this, either. So even existing pensions will have to be cut.

Those of us in the private sector have seen our 401(k) funds shrink, and Social Security’s retirement age hiked. The retirement age will be increased further. More shrinkage in retirement expectations is likely. That’s unfortunate, but reality.

Why shouldn’t those our taxes support share the difficulties with us? Were promises made to them about their pensions? Yes. But there’s nothing so evanescent as politicians’ “irrevocable” promises, even if put into a constitution.

Remember the first President Bush’s “Read my lips! No new taxes!!!!” in his 1988 campaign? In 1991, he broke his solemn word and raised taxes. Or how about, “Change we can believe in” from Candidate Obama in 2008? How much change have we seen?

Little Hoover’s report is welcome. It’s a start in pushing for cuts. More cuts will come.

Feb. 24, 2011