Pension Reform Legislation - A Fig Leaf For A Tax Increase

Pension Reform Legislation - A Fig Leaf For A Tax Increase is how one publication described the recent California "pension reform" legislation.  The Wall Street Journal agreed, opining, (Governor) "Brown's pension deal is little more than grease for a tax increase." How can one disagree? The fundamental unfairness and unaffordability of California's public sector pensions have been well established, yet employee organizations made every obtuse and dishonest argument their well paid bosses and lawyers could dream up to stop meaningful reform. Only after it became clear that the tax increase proposed by the Governor had no chance of winning without pension reform, did union bosses allowed the legislature to pass this watered down reform. The bosses think the people of this State are gullible enough to fall for such inadequate reform. We don't think so. Consider the following.         

The "reform" does almost nothing to reduce the pensions of current employees going forward. You may remember that one of the straws that broke the camels back was a 50% increase in pensions about 10 years ago - not only going forward, but RETROACTIVELY! The Little Hoover Commission, in its 2011 pension report, stated "The only way to manage the growing size of California Governments growing liabilities is to address the cost of future unearned benefits to current employees, which at current levels is unsustainable." That reform is not included.         

The legislation does nothing to relieve taxpayers from shouldering 100% of the responsibility for pension under-funding. Employees bear none of the responsibility. When you read that the pension reform allows cities to bargain for employees to pay half of pension costs - understand that means half of what is called the "Normal" cost. When Normal costs don't cover total costs, an "unfunded liability" is created. Right now La Mesa has an unfunded liability of $31 million. It costs taxpayers about $2.3 million annually as long as it stays outstanding. $2.3 million a year! Taxpayers will continue to pay two to three times as much as employees even if this "reform" is implemented.         

There will be no independent members of the union dominated board that controls the pension fund. That change is one the Governor previously said was essential to sound pension fund management. Since any shortfalls in pension funding are made up solely by taxpayers, the union dominated board has little motivation to practice sound management.         

Another provision of reform the Governor wanted was a guarantee that changes could not simply be undone by the next legislature. That provision isn't included. Pension Reform, such as it is in this legislation, can be undone all too easily. Tax increases, if passed, can remain forever.          

The pension reform does include some needed changes and potential for others - but they are simply not nearly enough. Public employee unions have played hardball for many years and continue to do so. If the citizens don't stand up and push back, public sector employees, represented by their elected union bosses, will continue to take all they can. Push back must include saying no to any tax increase until meaningful pension reform is passed and implemented. Tax increases simply allow politicians to continue to support unfair and unsustainable pensions. If any of the three tax increases on the November ballot passes, it is unlikely that we will ever see the changes necessary to make the pension system fair and affordable.

La Mesa Citizen Oversight Group