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Pension Reform Rollback Shows True “State of the State”

Friday January 22nd, 2016   •   Posted by K. Lloyd Billingsley at 5:01am PST   •  

ca_piggy_SLong before his latest State of the State address, governor Jerry Brown has been proclaiming that California is back, and as City Journal California associate editor Ben Boychuk notes, there is some ground for optimism. The Golden State has enjoyed impressive job growth over the past three years and this year might overtake Brazil with the seventh largest economy in the world. Boychuk, however, has a pressing question for Brown: “Can you really celebrate a projected $11.5 billion ‘surplus’ with a mountain of unfunded public-employee retirement benefits looming large?” As Boychuk notes, the state’s unfunded pension and health care liabilities stand at $220 billion and “that would seem to suggest a surplus in name only, would it not?”

Sacramento Bee columnist Dan Walters also took up this theme, after news that the pension reform measure advanced by Chuck Reed and Carl DeMaio would not be on the 2016 ballot. No one truly knows the extent of the unfunded liabilities, Walters wrote, because of unrealistic estimates of what pension trust funds will earn. And consider the dynamics in play. “However large they may be, fast-growing pension and health care liabilities don’t discomfit any major interest groups, since their greatest impacts are on local governments, especially cities, rather than on state government.” And reform measures draw “high-dollar opposition” from government employee unions, well stocked with cash they can confiscate even from non-members. So as the veteran columnist sees it, unfunded pension liabilities will continue to grow, and the day of reckoning again kicked down the road. Worse, “the pension reforms that DeMaio and Reed achieved at the local level are being dismantled in their absence.” That rollback is evidence that meaningful pension reform is practically impossible in California. That is the “state of the state” taxpayers should find troubling.

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January 2016