Pander Now, Pay Later
Pension time bomb could rock California
For all the grumbling about November's special election, the biggest problem with the vote isn't what's on the ballot, but what isn't.
Due to poor staff work in the Governor's Office, pension reform - arguably the greatest of California's governmental needs - was dropped back in April, amid concerns that it would scrap benefits for widows and orphans.
Meanwhile, California residents have only begun to recognize how severe the pension liability problem is at both the state and local levels.
Politicians love to dole out pension perks because it's an easy way to curry favors with the public-employee unions that fund their campaigns. The unions get extravagant retirement packages for their members, but politicians don't need to worry about paying for them because the bills won't come due for decades.
While most of us in the private sector make do with 401(k)s, most public employees are guaranteed pensions that will pay close to or all of their highest working salaries, including cost-of-living adjustments that often outpace the rate of inflation.
They also get free health care, for life, as do their family members.
And, unlike the rest of us, they don't even need to pay the employee portion of their pension contributions.
The upshot of all this generosity is that California public agencies are looking at an unfunded liability of at least $110 billion in coming years. The money will need to come from higher taxes and slashing public services. Some municipalities could simply end up going bankrupt.
But the closest thing to a fix suggested yet - Schwarzenegger's reform plan - was bungled off the November ballot.
Schwarzenegger is expected to resurrect the measure next June, and Assemblyman Keith Richman, R-Granada Hills, has proposed a constitutional amendment requiring all new public employees to go on 401(k) plans. But the problem compounds with each passing day.
The craven irresponsibility of state and local officials will no doubt cost California dearly. The only question now is, how much?