Sunday, January 25, 2015
FAIRFIELD-SUISUN, CALIFORNIA
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Public pension reform unlikely, but problem isn’t going away

walters column sig

By
From page A8 | April 02, 2014 |

San Jose Mayor Chuck Reed’s chances of enacting a comprehensive public pension reform ballot measure were scant even before Attorney General Kamala Harris gave it an unfriendly official summary.

He faced the essential dilemma of all would-be pension reformers: They have no natural allies among the political interest groups that might put up the many millions of dollars a successful ballot measure drive would require, but must contend with public employee unions – foes with bottomless wells of campaign money.

When Harris’ office issued a summary that characterized the proposal in negative terms closely paralleling the unions’ position, and Reed couldn’t persuade a judge to alter it, he backed off.

While Reed says he may try again for 2016, there’s no reason to believe he would be any more successful then. Pension reform that substantially goes beyond the largely superficial changes made by Gov. Jerry Brown and the Legislature a couple of years ago is not doable anytime soon.

That doesn’t mean, of course, that the problem vanishes. But it’s mostly one affecting San Jose and other cities because they devote such large portions of their budgets to high-salaried police and firefighters with the highest pension benefits.

Cities are being forced to set aside ever-higher amounts for police and fire pensions in trust funds and since they have little ability to raise revenues, they must either cut other services or run deficits.

Three cities have already been driven into bankruptcy, in large measure because of their hefty pension payments, and several others are teetering on the brink of insolvency.

Moody’s Investors Services, a major credit-rating firm, says the suspension of Reed’s measure is a “credit negative” for California’s local governments due to rapidly growing retirement costs “with few tools to address them.”

In other words, even if local governments aren’t driven into bankruptcy by their escalating pension costs, they’ll likely face higher costs for borrowing as their credit ratings suffer.

The true costs of future retirement obligations have been masked by traditional government accounting, which doesn’t count them as bond-like debts.

However, Moody’s says they are, and the Governmental Accounting Standards Board last week refused to back down from its 2012 decree that they must be reported as debts on government balance sheets.

“Among other improvements, net pension liabilities will be reported on the balance sheet, providing citizens and other users of these financial reports with a clearer picture of the size and nature of the financial obligations to current and former employees for past services rendered,” former GASB Chairman Robert H. Attmore said when the decree was published in 2012.

Perhaps when voters see mounting pension debts in black and white, it will make a difference.

Dan Walters is a columnist for the Sacramento Bee. Reach him as dwalters@sacbee.com.

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Discussion | 4 comments

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  • Tim DowlingApril 02, 2014 - 10:43 am

    This is a problem the City of Fairfield needs to address- City services have already been cutback dramatically- and the ongoing need to feed the pensions mean that the cuts are going to grow and grow-

    Reply | Report abusive comment
  • rlw895April 02, 2014 - 12:37 pm

    This is a more insightful article than many on the subject, because it distinguishes between police and fire pensions and other public pensions. Police and fire tend to retire earlier and have more generous formulas for calculating pensions, increasing the total obligation over other public employees.

    Reply | Report abusive comment
  • LWApril 02, 2014 - 2:19 pm

    It would be best to take the cap off payroll tax... and mandate all with an income to pay in, no exceptions. Then raise the min. SS check up to apprx 3k per month. It would also be a good thing to- Mandate all employers to provide a retirement. Quit taking away benefits, The middle class working people have paid to high a price already.

    Reply | Report abusive comment
  • Mr. PracticalApril 02, 2014 - 5:13 pm

    LW, how would you define the "retirement" that you want all employers to provide? Most employers due what they can within reason. Taking the cap off unemployment taxes would be disastrous. Since the benefit maxes out, why should employers contribute more that what it takes to fund that maximum? A better solution would be to have the employee pay half of the UT since they are the ones deriving the benefit. Just like we do with SSI.

    Reply | Report abusive comment
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