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Jon Fleischman

The Two Truths On Pension Reform, And Why This Deal Isn’t It

This is very simple, and very straightforward.

In order to have real, meaningful public employee pension reform, there are two factors that matter more than any others, neither of which are present in the proposal that is being announced by Governor Brown and legislative leaders today.  This, of course, is not surprising.  If you look at the campaign reports from Governor Brown’s campaign, as well as those for just about every legislative Democrat, you would have to look hard to find major contributions that are not from unions.

The two missing components:

1) Meaningful impact on the one number that matters — the unfunded pension liability.  A study out of Stanford University pegs that number as north of $500 billion dollars.  The word is that this “big reform” that will be announced by Brown may provide about $20 billion in savings.  Needless to say this hardly moves the needle at all.  And without seeing the details of the proposal, one can assume that this plan is very light on requiring current employees to pay more towards their retirement — I suspect it actually has no impact on current employees for remaining years of service.

2) None of the reforms, however insignificant compared to lack of meaningfully bringing down the unfunded liability, are safeguarded from being repealed or ratcheted down by future legislative action.  We already have seen this legislature retroactively increase benefits for public employees.  The only realistic way to ensure that pension reforms are secure is by placing them on the ballot, so that the voters of California can lock them in place.  This has been a key demand of Republicans throughout the legislative process, one that has been ignored by Democrats.  When the deadline passed earlier this summer for the the legislature to place a measure before November voters, that effectively closed the door on permanent pension reforms.

Look for the feigned indignation and anger from the public spokespeople for the unions, and their public relations flacks.  While the unions know that they have dodged a bullet with these relatively minor adjustments, critical to the buy-in of the media is that they must be “outraged” by this action.  Queue the outrage… now.