Jewish Journal

Delaying the Inevitable in Sacramento

by  David A. Lehrer

June 28, 2010 | 3:25 pm

This past weekend’s press brought good and bad news—-good news that the pension/budget disaster that looms over local and state governments from coast to coast is getting the attention from the media that it deserves; bad news that many of our elected leaders are still willing to act as if there is no problem and avoid confronting the unpleasant realities that are before us.

Sunday’s The New York Times Magazine featured a piece by Roger Lowenstein entitled “The Next Crisis: Public Pension Funds,” a much needed report on how “public pension funds are now massively short of the money to pay future claims—-depending on how their liabilities are valued, the deficit ranges from $1 trillion to $3 trillion.”

The article details California has a prime example of states skimping on what they owe their pension funds while operating under actuarial projections that typically assume 8% annual returns. Assumptions that allowed, as Lowenstein pointed out, “payoffs to powerful, unionized constituents at minimal cost.”

The game that has been played can’t continue for long—-8% returns aren’t in the cards and pension funds are demanding contributions (Calpers, California’s biggest state pension fund, is forcing hard-pressed localities to cough up an extra $700 million in contributions). 
The Times’ piece concludes that,

States really have no choice but to further cut spending and raise taxes. They also need to cut pension benefits. About half have made modest trims, but only for future workers. Reforming pensions is painfully slow, because pensions of existing workers are legally protected. There is, of course, no argument for canceling a pension already earned. But public employees benefit from a unique notion that, once they have worked a single day, their pension arrangement going forward can never be altered. No other Americans enjoy such protections. Private companies often negotiate (or force upon their workers) pension adjustments. But in the world of public employment, even discussion of cuts is taboo.
Government’s greater ability to borrow enables it to defer hard choices but, as Greece discovered, not even governments can borrow forever. The days when state officials may shield their workers while subjecting all other constituents to hardship are fast at an end.

Apparently, The New York Times Magazine doesn’t get wide enough circulation in Sacramento to impact its citizenry.

The Los Angeles Times reported over the weekend that the Democratic leaders of the state legislature are divided over just this issue. The State Senate’s leader, Darrell Steinberg, is willing to work across party lines to achieve “a lasting solution to the state’s accounting mess.” But his counterpart in the Assembly, Speaker John A. Perez, “is approaching the budget as a rigid partisan….mostly through massive borrowing of dubious legality” and the two are vying for influence in negotiating the 2010-2011 budget.

The article lays a good deal of the blame for the speaker’s intransigence at the foot of “organized labor leaders, who hold considerable sway over the Legislature.” Indeed, both they and Perez are, according to the article, “postponing the day of reckoning—-perhaps until a Democrat is in the governor’s office.”

Combining the two Times’ pieces doesn’t give one a warm and fuzzy feeling as a Californian. In fact, just the opposite is the case.

Our public employee unions will work over Perez and his colleagues to insure that accommodating California’s budget to the realities of our times doesn’t occur. And they’ll beat up on their friends if necessary.

Steinberg angered the unions when he told them this month that “he would not rule out a budget agreement that rolled back some retirement benefits their members receive.”  The California Teachers Association wasn’t pleased. The Times reported that “they posted billboards in Steinberg’s district implying that he sold out teachers—- and his constituents—-in previous budget deals.”

The distressing budgetary facts that California and the rest of the country must come to grips with are irrelevant to the public employee unions who have a narrow and self absorbed focus and will mercilessly squeeze our electeds (including their friends) to get what they want.

Would that there were a few more leaders willing to make tough choices to spare us from imminent disaster, a Greece-like financial implosion. Steinberg ruefully told the Times that “in this position, you have to govern.” We need a few more leaders willing to govern as well.


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