Unions Say: 'Shut Up and Pay Us'

MAY 16, 2011

Yet another report confirms the enormous liabilities that California taxpayers must endure to pay for pensions for public employees. The study, released May 5 at a Pension Boot Camp for elected officials held near Sacramento by the reform group Californians for Fiscal Responsibility, echoed the points made by the watchdog Little Hoover Commission, Stanford University and others: “Public pension funds in California face massive shortfalls,” the result of pension benefits that are much richer than those in the private sector.

The reaction from the state’s muscular public employee unions has been as predictable as it is comical. Union spokesman and Democratic activist Steve Maviglio blamed Wall Street greed and argued that “Pension reform is a Trojan horse for an attack on public employees,” as if the potential half-trillion-dollar unfunded liabilities (per Stanford) and fiscal problems faced by state and local governments are mere fictions trumped up by “right-wing” Republicans to diminish government workers.

The silliest response came from pro-union organizations that sponsored the www.DontScapegoatUs.com website, which features the type of heavy-handed ad hominem approach perfected by the state’s public employee unions, which are used to bully and threaten politicians into obedience. The site puts the heads of prominent pension reformers on the bodies of farm animals, spins some conspiratorial yarns about out-of-state billionaires and Wall Street greed. It even depicts some Progressive Democrats as “right-wing zealots.” Apparently, anyone concerned about the effect of these unsustainable pension promises on government budgets and taxpayer wallets is a right-wing zealot. And never mind that some of the worst Wall Street scandals enmeshed CalPERS, the California Public Employees’ Retirement System.

CTA Protests

Meanwhile, the California Teachers Association – the state’s biggest and richest public employee union – filled the state Capitol with its T-shirt-wearing members after pulling back from some of the zanier protest ideas, such as closing freeways with swarms of angry teachers. Their goal – intimidate the Legislature into passing tax extensions and avoiding cuts to already bloated school budgets.

CTA members, of course, will never accept any reforms to the way the current monopoly systems provide education, even in the face of new evidence showing how costly and nearly impossible it is to fire incompetent teachers. The CFFR study found that teachers receive a smaller retirement than many other government employees, but it’s still far more generous than those offered in the private sector and the California State Teachers Retirement System still manages to run up an unfunded pension liability estimated at $56 billion.

The fact-devoid emotionalism peddled by union officials ignores the key findings of the CFFR study: “The combination of retroactive benefit enhancements, lengthening lifespan and some weaker-than-expected investment returns during recent years has led to deterioration in the condition of public funds in California. As of 2010, the five largest public pension systems are only between 61 percent and 74 percent funded for benefits earned for past service, based on the actuarial assumptions used by those systems. These measures would be even lower if they instead reflected the assumptions mandated for use by private-sector plans.”

Defenders of union pensions argue that pensions comprise a small portion of the state budget but neglect to mention the enormous bite on local government budgets consumed by such benefits. They also conveniently ignore the unfunded liabilities – the fact that the state should be paying much more to cover these retirement promises, but instead is running up an unsustainable level of debt.

Hoover Commission Report

Here’s a relevant passage from a report from the Little Hoover Commission, a nonpartisan oversight agency that is part of the California state government:

“Pension costs will crush government. Government budgets are being cut while pension costs continue to rise and squeeze other government priorities. As the Commission heard during its hearings, the tension between rising pension costs and lean government budgets is often presented today in a political context, with stakeholders debating the severity of the problem and how long it will last. In another five years, when pension contributions from government are expected to jump and remain at higher levels for decades in order to keep retirement systems solvent, there will be no debate about the magnitude of the problem. Even with the introduction of two-tiered pension plans, barring a miraculous market advance, few government entities – especially at the local level – will be able to absorb the blow without severe cuts to services.”

Apparently, that, too, is scapegoating. The commission apparently is just trying to insult public employees.

So the angry teachers strutted around the Capitol, demanding more money without any regard to fiscal reality. Some of their placards demanded the state “tax the rich,” even though California’s steeply progressive income tax taxes the rich more severely than anybody else. Speakers insisted that public education is a “human right,” which typifies the level of discourse there. They want more! They deserve it! Don’t bother them with arguments or details. Don’t worry about how to pay for any of this, and don’t you dare discuss ways to better stretch an education dollar by cutting administrative costs or adding some competition.

Union Arguments

I know this is shocking, but the unions use dishonest arguments about the “average” amount of public employee pensions. Such averages include payouts to people retired perhaps for decades and are typically much lower than payouts to recent retirees, whose benefits were calculated using formulas that have swelled over the past decade. Note the “$100,000 Pension Club,” compiled by CFFR, with a membership that’s growing by about 71 percent a year.

Virtually no one in the private sector retires at age 50 or 55, and virtually no one in that world receives $100,000, cost-of-living-adjusted pensions, plus fully paid medical care. And that’s all before the various and unseemly pension-spiking gimmicks viewed by public employees more as an entitlement than fraud, especially those in the public-safety jobs, who claim heroism in order to further enrich themselves.

But pointing out these facts amounts to scapegoating in the views of union members who want the general population to pay endless taxes to sustain the lifestyle they have come to expect. They want to intimidate us into shutting up about the size of the debt by using cheap emotional ploys. We should ignore them and their silly protests and keep pointing to the facts. They should stop insulting us.

— Steven Greenhut