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Matt Blumenfeld

California Government Worker Pensions Need a Dose of Transparency

Despite Gov. Brown’s bold claims about a balanced budget, California still has yet to address the questions surrounding the state’s unfunded pension liabilities. As of the end of 2010, California’s state and local pension obligations in the Golden State were estimated at a soul-crushing half-trillion dollars and steadily increasing each day. However, despite the best attempts of Sacramento lawmakers to avoid dealing with the state’s enormous unfunded pension liability, the public is about to get a better sense of just how dire the situation really is thanks to increased transparency.

At the end of the month, California will see its pension liability nearly double on paper from its current official estimate of $128.3 billion to $328.6 billion thanks to new rules being put in place by Moody’s. The new rules will require local governments to report “more realistic, lower expected rates of returns on their pension assets, instead of the often overstated returns they now use to paper over the true costs that California taxpayers are ultimately on the hook for.”

Moody’s will soon require the state to fully fund its pensions, which are currently 36 percent underfunded. It’s clear that more transparency is needed if the public is going to have a true understanding of just how much taxpayers are on the hook for. Fortunately, the state recently announced that the public is also about to get a better sense of lavish pension benefits that government workers receive, which private sector workers could only dream of. CalPERS, California’s largest public retirement system, recently announced that it will soon launch a searchable pension database. According to the Sacramento Bee, “The database will provide retiree information that is considered public: pensioners’ names, their monthly gross pension payment, their base allowance, the Cost of Living Adjustment, their years of service, when they retired, their pension benefit formulas, final compensation and last employer.” As a result, it will be much harder for egregious instances like a lifeguard that retires at 50 with a six figure taxpayer-funded pension to go unnoticed. However, just when the public was clamoring to for information on government work pensions in order to better understand why the Golden State continues to delve further into the red, CalPERS changed course and recently announced that it will delay the launch of the searchable database. The delay came in response to protest from government workers, which makes one wonder what they’re so eager to hide.

The public pension database is a good way to inject much-needed transparency, but more still needs to be done protect taxpayers, and the federal government needs to make clear that it will not bailout the likes of California, Illinois, and New York from of their unfunded pension liabilities. As it would happen, legislation has been introduced on the Hill to accomplish this. At the end of 2010, H.R. 1628, the Public Employee Pension Transparency Act was introduced by Reps. Devin Nunes (R-Calif.), Paul Ryan (R-Wis.) and Darrell Issa (R-Calif.). This legislation would require states and municipalities to provide an accurate assessment of their public pension liabilities. The bill also makes clear that these pension obligations are the sole responsibility of state and local governments.

Claims that California’s finances are in order are bogus. Exhibit A is the state’s unfunded pension liability. Unfortunately, California legislators appear to lack the political will to address the matter and protect taxpayers. As such, it’s incumbent upon members of Congress from around the country to ensure that their constituents’ tax dollars don’t end up bailing out profligate state governments such in Sacramento, Springfield, and Albany.

Matt Blumenfeld is a state affairs associate at Americans for Tax Reform