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Scott Thomas Wilk: Public-employee pensions: the silent killer

Right Here, Right Now!

Posted: August 19, 2011 1:55 a.m.
Updated: August 19, 2011 1:55 a.m.
 

This year, the Legislature and governor passed an on-time budget. But just because it is on-time doesn’t mean it’s good.
The budget failed to generate a single Republican vote — and for good reason. It relies on gimmicks and overly optimistic revenue projections.

Republicans tried to reach across the aisle to come to agreement on reforms that would put our state back on the pathway to solvency. Some of these reforms included a spending cap, public-employee pension reform and tort reform. All were rejected by Gov. Jerry Brown and the Democrat-controlled legislature.

On April 21, Brown held a town hall meeting at Hart High, and I was honored to be invited. The program was largely a dog-and-pony show to highlight the need to extend taxes. At the conclusion of the love fest, to the governor’s credit, he asked if anyone in the room had a contrarian view to share. This provided me the opportunity to engage the governor.

I made the case that without real reform, California would continue in an economic quagmire.

The L.A. Times reported Brown stating, “You make an eloquent point for your perspective here.” Brown only responded to pension reform, saying it would net “long-term savings” but wasn’t that big of a deal, since pensions are only rising about $200 million annually.

Am I the only person who thinks $200 million a year is a lot of money?

In March, the governor unveiled his pension-reform plan. Sacramento Bee columnist Dan Walters wrote, “While a 12-point plan sounds impressive — especially coming from a politician who historically has sneered at multipoint policy plans — there’s less there than meets the eye.”

While I support Brown’s plan, the reforms were on the margin and did not address the fundamental flaws of the system.
According to the Senate Republican Caucus website, in the last 10 years, the cost to taxpayers of employee retirement benefits has increased by 2,000 percent from $150 million per year to more than $3 billion. Over that same time period, state revenues have risen only 24 percent. Outside analysts have pegged the potential unfunded liabilities of CalPERS, the California State Teachers’ Retirement System and the University of California pension system as high as a half-trillion dollars, which equates to about $36,000 per household.

Obviously, footing the bill for overly generous public employee retirement benefits divert funds to other programs such as education, public safety and infrastructure improvement and repair.

According to Fix Pensions First, there are 9,111 retired California government workers who receive pensions in excess of $100,000. Bruce Malkenhorst, from the city of Vernon, placed No. 1 at $509,664 or $42,472 per month. Former city manager of Palmdale Bob Toone finished ninth at $237,606 per year.

In March, the Little Hoover Commission issued a report on public-employee pensions along with a number of recommendations to reduce growing pension liabilities.

They include: 
* The Legislature should give state and local governments the authority to alter the future, unaccrued retirement benefits for current public employees.

* To restore the financial health and security in California’s public pension systems, California should move to a “hybrid” retirement model.

* The Legislature must create pension options for state and local governments that would retain the defined-benefit formula — but at a lower level — combined with an employer-matched 401(k)-style defined-contribution plan.

* Cap the salary that can be used to determine pension allowances, or cap the pension, at a level that is reasonable and fair.

* Set appropriate pension eligibility ages to discourage early retirement of productive employees.

* Set a tight definition of final compensation, computed on base pay only, over a five-year average to prevent and discourage pension “spiking.”

* The Legislature must require employees and employers to annually adjust pension contributions based on an equal sharing of the normal costs of the plan.

The current pension program is unsustainable. Much like cancer, it is a silent killer that if left untreated will choke the life blood of funding to other vital services. The Legislature must address real reform now so our schools, parks, roads and universities receive the funding they deserve to benefit all the people of California.

Scott Thomas Wilk is a member of the California Republican Party and elected member to the Republican Party of Los Angeles County.

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