Pension Deals Aren’t Real Progress

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When is good news really bad news? When it comes to four new union contracts with state workers that the Schwarzenegger administration is touting this week as evidence of pension reform.

California faces dangerously large unfunded liabilities for public worker pensions and retiree health care. The unions that represent public workers, quite understandably, have fought efforts to reduce those obligations and place more of the risks and responsibility for retirement on workers, instead of taxpayers. But the size of the obligations is so large (probably more than $100 billion, though probably not close to the half trillion cited in one Stanford study) that it's clear something must be done. Taxpayer dollars used to meet pension obligations are taxpayer dollars we can't use to educate children and provide health and human services programs for those who need them.

The new union deals are problematic in a couple of ways.

One has to do with the details of the agreement. While current members will have to contribute more to their pensions, some of the so-called reforms -- particularly an increase in the retirement age from 50 to 55 for public safety workers -- are limited to new hires rather than current workers. Current workers, particularly baby boomers, are virtually certain to get so much more out of the system than they pay into it that they ought to be arrested for generational theft. They need to take more of the hit for this. That's a difficult position to take, politically and legally, but it's also the right one.

The second problem is strategic. Democrats in the legislature, cowardly and incorrectly, have been saying that pension reform can be done through collective bargaining. These contracts are already being used as evidence of that claim. Unfortunately, the state badly needs legislative action to limit pensions -- in part because it's legislative action (most notoriously the big benefit enhancements approved in 1999) that has created the huge pension obligations of today.

One caveat: There's a strong tendency on the right and among business groups to blame the state's budget problems exclusively on public employee unions. That's unfair and inaccurate. Californians themselves -- and their tendency to demand something for nothing -- is at the root of the problem.

But these unions are one important part of the problem. While they don't always seem to recognize it, they have a strong interest in being part of solutions to make state government fiscally solvent. 

But savings on pension obligations can't be the only money that elected officials and voters grab to balance the budget and put the state on a better long-term footing. Everyone needs to give back -- from those who rely on public services to the wealthy and corporations, who have seen their taxes cut even as Californians experience government service cuts and income and sales tax increases. Robert Cruickshank of the progressive Internet-based organization Courage Campaign gets into this, with a thoughtful appraisal of criticism of public employee unions at PublicCEO.

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