Day of reckoning approaches for California pension system

At least 75 cities, counties, and public entities in California are considering cutting public pension benefits as well as raising the amount employees must contribute. Four localities, including San Francisco, will probably have pension-related ballot initiatives in November.

When San Francisco has such an initiative and it is supported by Matt Gonzalez, former chair of the Board of Supervisors and prominent Green and progressive, well, the times they are a ‘changing indeed’. American Leftist, a hard left blog, says Gonzalez has gone over to the dark side, and made a deal with business interests against the needs of workers. Could be, I suppose.

But, maybe Gonzalez realizes the painful truth. Municipalities are going broke due to the recession while simultaneously having to spend ever more on public pensions. It’s not sustainable. The money just isn’t there. Either municipalities, including San Francisco, do something about escalating pension costs or bankruptcy a few years down the line becomes a real possibility. 

Will the hard right attempt to use this as a pretext for union busting? Sure. Meanwhile, unions are saying, don’t blame the workers, as real estate and stock market crashes triggered by greed were the primary reasons that pension funds are doing so badly now. This fight over pensions could easily turn into a serious slugfest as special interests groups from all over the political spectrum jump into the fray. It will also be divisive inside of unions, as current members may vote to keep their own benefits but to bargain away those of new hires, setting up a two-tiered system. 

An enormous problem with the current public pension system is that the funds like CalPERS can force the state and other public entities to make up any shortfall they have. Gov. Schwarzenegger says this means that private sector employees are funding pensions of public sector employees as well as their own.  Not only is such a system inherently unfair, “we don’t have the money,” he says.  However, CalPERS has mandated that the State of California pay them $3.8 billion this year, up from just $145 million in 2000, as they have successfully managed to lose billions of dollars. 

California has a staggering $500 billion in unfunded pension debt. Where the money will come from, no one knows. One of the sponsors of the San Francisco initiative, public defender Jeff Adachi, says that city spends $1.2 billion in pensions and health care while it cuts services and raises the price of parking tickets.  Further, the pensions cost 28 times more than what the city spends on street repairs and maintenance. 

Sacramento has a new Odd Couple. Gov. Schwarzenegger has enlisted the help of Willie Brown, the legendary former Speaker of the Assembly and hardcore Democrat, to help generate momentum for pension reform. Brown said he learned firsthand about pension problems while Mayor of San Francisco from 1996-2004. 

Pension reform promises to be among the most contentious issues facing Californians. And the battles have barely begun.