Saturday, September 11, 2010

Public Employee Unions II

Following up on yesterday's post, here is an article from City Journal about the public pension obligations in California.

An excerpt.

“With California facing a structural $19 billion budget hole, Governor Arnold Schwarzenegger has argued that the state will need to tap its general fund for billions to prop up faltering public-employee pension funds. The funds face massive losses because of a down economy, increased pension obligations, and some badly leveraged investments. Some critics charge that the governor is merely trying to generate pressure for pension reform, but in any case it’s clear that generous pension plans for public employees have drained the budgets of government services—especially the kinds dear to the hearts of Democrats. Yet most Democratic leaders refuse to acknowledge this reality, preferring instead to rail against the horrors of budget-slashing Republican proposals.

“A recent Stanford University report pegs the state’s unfunded pension liability—or debt—at a scary $500 billion. The situation has become particularly dire at the local level. As the Los Angeles Times reported in August: “The cost of retirement benefits for Los Angeles city employees will grow by $800 million over the next five years, dramatically eroding the amount of money available for public services to taxpayers. . . . By 2015, nearly 20% of the city’s general fund budget is expected to go toward the retirement costs of police officers and firefighters, who now have an average retirement age of 51. The figure was 8% last year. Once civilian employees are factored in, nearly a third of the city’s general fund could be consumed by retirement costs by 2015.”

“Cities and counties throughout California are wrestling with the pension problem. In a case that could have statewide implications, the Republican-dominated Orange County Board of Supervisors is pursuing a lawsuit that challenges the retroactive portion of a previous board’s 50-percent pension hike for deputy sheriffs. The board has required an increased contribution from county retirees for their health care—a non-vested benefit, which allowed the changes to pass court muster. Shasta County has also approved some viable pension reforms. But these are conservative counties. In California’s biggest cities—which will be hit with the first waves of the pension tsunami—reformers will need to come, at least in part, from the ranks of the Left.

“Fortunately, at least a few self-styled “progressive” urban Democrats are breaking with the party leadership’s union-controlled ranks to offer serious pension-reform proposals. Given California’s political dynamics, the emergence of left-leaning pension reformers is remarkable. Not surprisingly, they’re being treated as traitors by the state’s traditional liberals and subjected to the kind of union bullying usually reserved for conservatives and Republicans.

“Governor Schwarzenegger’s chief pension adviser, David Crane, is a prominent progressive who is making the pension-reform case on a statewide level. Marcia Fritz, president of the California Foundation for Fiscal Responsibility and creator of the CalPERS $100,000 pension club database—which reveals the names of over 9,000 retired state workers receiving six-figure pensions—is a Democrat. But the center of the newest pension-reform debate is San Francisco, where Public Defender Jeff Adachi—a Democrat with impeccable progressive credentials—recently sponsored a ballot initiative, the Sustainable City Employee Benefits Reform Act, which would force city employees to pay a larger share of their retirement costs. As Randy Shaw wrote in July for the alternative online daily, Beyond Chron: “We are about to embark on a campaign that could bitterly divide progressives, while empowering San Francisco’s moderate and conservative forces.” In late August, Judge Harold Kahn approved the initiative, Proposition B, for the November ballot despite the efforts of the city’s muscular public-employee unions to kill it.”