Brown's Pension Reform A Yawner

APRIL 1, 2011

By STEVEN GREENHUT

It’s hard to know whether to be relieved that Gov. Jerry Brown has finally recognized the state’s massive pension problem or to be appalled at how long it took for him to address and at the way his “Jerry Come Lately” plan manages to avoid the most serious issues.

Stanford University estimates California’s pension liability at an astounding half trillion dollars, yet the governor has resisted Republican efforts to put serious pension reform on the ballot in addition to the tax-extension measures Brown believes are the key to a budget solution. Now, after the governor backed out of talks with the GOP, he released his pension plan. This is about little more than public relations — a chance for the governor to shame the GOP while championing the reform mantle.

But Brown isn’t really interested in pension reform. Union officials seemed surprised that he released the plan. They complain that any such reforms should be done at the negotiating table, which has been the standard Democratic talking point. That’s a joke. Unions typically own both sides of the negotiating table. They elect their own bosses. Anything done at that table will only harm taxpayers. But if Brown were serious about pension reform, his plan would not have been a shock to unions. He would have already given them an ultimatum or at least given them the heads-up about what was coming down the pike. Nope, this was a quick press release offered for bargaining purposes as a way to one-up the GOP.

It’s not that the proposals are bad. I support all of these things. It’s just that these are the obvious simple reforms that should not even be up for debate. For instance, the first measure would eliminate something known as “airtime.” As the Brown statement explained, “Would eliminate the opportunity, for all current and future employee members of all state and local retirement systems, to purchase additional retirement service credit.” Airtime is an abuse of the taxpayers. Typically, public employees are able to buy additional retirement credit for a small percentage of the actuarial cost. It’s unnecessary especially given how generous these basic retirements already are.

The second item prohibits “pension holidays.” Here is the statement again: “All California public agencies would be prohibited from suspending employer and/or employee contributions necessary to fund the normal cost of pension benefits.” Instead of paying into the system when times are good, agencies often will save the cash. They love to hide the size of the pension debt. Private sector companies can’t get away with these kinds of unsound financial practices.

The third item: “Prohibit Employers from Making Employee Pension Contributions.” Union members always blather about how much their members contribute to their own pensions. What they never say is how often the taxpayer — i.e., the agency — pays the employee’s contribution in addition to the employer’s contribution. Notice that such stunts rarely could happen in the private sector. But this is only taxpayer money after all.

The fourth item would ban retroactive pension increases. Here’s another outrage. Virtually all of the pension increases in recent years have been granted retroactively — going back to the day the employee started working. This is done as a buy-off to union officials. Girard Miller of Governing magazine argues that retroactivity is never justified. I’ve heard union officials defend these increases as measures to help recruitment, but it does nothing to enhance recruitment (not that recruitment is ever really a problem in the overpaid public sector) by giving current employees gifts of public funds. In fact, the Orange County Board of Supervisors is pursuing a lawsuit against the retroactive portion of a 2001 pension increase for deputy sheriffs by making that unconstitutional gift of public funds argument along with the argument that the increase runs up debt without a vote. A vote for debt is required by the state constitution.

The fifth item bans a noxious pension-spiking scheme that allows California public employees to base their permanent retirement pay on the last year’s work rather than on an average of the last few years, which is how more normal states do it. In California, workers will find ways to artificially inflate their last year’s pay (bogus promotions, moving to temporarily take a higher-paying job) so that they will have an inflated pension, all courtesy of the state. The sixth item limits some other pension-spiking gimmicks by requiring that only base pay is used to calculate pensions.

The seventh item “Prohibits payment of pension benefits to those who commits a felony related to their employment.” A proposal that would have done that was crushed by Democrats earlier this year. Unions argued that it’s unfair to the families of these felons. But we’re talking about corrupt cops and others who committed a fraud — who used their government position to commit serious crimes, yet who can then still receive these pensions. Remember that unions defend even the worst among them.

So these are good, simple measures that would — if the plan goes forward — halt some of the most corrupt pension practices. But these items will not fix the bulk of the problem, although they will save some money. They do not address oversized pensions or promote anything that will save the kind of money needed to get the system under control. Almost as an afterthought, the governor’s statement includes the following:

PROPOSALS UNDER DEVELOPMENT

Impose Pension Benefit Cap.

Improve Retirement Board Governance

Limit Post-Retirement Public Employment

Hybrid Option

Address CalSTRS Unfunded Liability

Note that these measures, which at least sound like they are getting closer to the heart of the problem, don’t even get a full sentence of explanation. This confirms my thesis that Brown is engaging in a public relations stunt. He basically had his staff throw together a press release offering half-baked solutions. It’s not as if this is a new issue, given that he offered more detailed proposals during his campaign. If he were serious about reform, the unions would know what was coming and would be furious. The proposals would be in depth. Republicans would be taking them more seriously.

But Brown, master politician that he is, is playing games.

I welcome any pension reforms. I support the ones he detailed. But I wouldn’t assume that Brown is anywhere nearly as serious about these proposals as he is about pitching tax extensions.