POOR LEGISLATIVE JUDGMENT, NOT RISING PENSION COSTS ARE INFLATING BUDGETS
By Steven Tavares
Unions contend Sacramento is waging a war on its hard-fought employee benefits. Schwarzenegger convinced a small, but notable group of public employee unions to slash benefits for new hires, but other groups may not be as helpful until a possible Democratic governor takes over next year. A recent piece by George Skelton in the Los Angeles Times says public employees and their benefits, though, are not the problem and are taking the undeserved brunt of calls for budget reform in California.
"One persistent myth about the perpetually bleeding state budget is that it's all the fault of public employee unions," wrote Skelton. "In truth, California's budget nightmare stems from a devil's brew of sins: lack of discipline on both spending and tax-cutting in the past; an outdated and unreliable tax system too susceptible to economic booms and busts; the unhealthy dependence of local governments on Sacramento; and a dysfunctional state budgeting process that requires a gridlock-generating two-thirds majority vote."
Skelton says cutting benefits and wages has not lowered the state's $19 billion deficit--only raising taxes will help alleviate the situation. San Leandro is slated to contribute close to $10 million in pension costs. Its over $7 million deficit was barely balanced for this next fiscal year even though 350 of its city employees agreed for the second consecutive contract to take make contract concessions. San Leandro employees will pay more for their health care starting next year and lose nearly five percent of their salary through 12 furloughs days. The San Leandro police officers may also make concessions in the coming weeks to further lower the city's financial burden.
An illuminating article in last week's New York Times Sunday Magazine by Roger Lowenstein does well to explain how public pensions are positioned in the coming years to wreck state budgets across the country, but it is not solely the fault of pernicious public employees and their rascally job protections.
"Pension funds subsist on three revenue streams: contributions from employees; contributions from the employer; and investment earnings," said Lowenstein. "But public employers have often contributed less than the actuarially determined share, in effect borrowing against retirement plans to avoid having to cut budgets or raise taxes." Unsustainable returns and dubious investment plans have also put pressure on state funding of pension, said Lowenstein.
Conversely, you can easily find a pro-business, anti-union argument calling for lower expenditures to public workers without mentioning how the budget decisions in state capitols contributed far more to the crisis than ballooning worker benefits. A opinion piece from January in the Wall Street Journal by Steven Greenhut puts the onus solely on workers with typical emphasis on the minuscule number of public employees who earn pensions of over $100,000 at the relative young age of 50. For good measure, Greenhut also slips in the conservative conceit of union-splitting union by calling on members to vote on the organization's political involvement.
In San Leandro, it is interesting that mayoral candidate Stephen Cassidy has called on city employees to pay more towards their own pension, while Mayor Tony Santos has publicly massaged his overwhelming union support in the city. Santos, though, has pulled on both sides of the argument masterfully by describing Cassidy as a conservative because of his stances on public employees and their pension, while he has made significant cuts with layoffs, wages and pensions for new hires. Santos said recently Cassidy's idea for lowering the city's responsibility to city employees was "disingenuous" since any changes are subject to collective bargaining, but Santos might be amendable to some sort of two-tier system proposed by some on the right where new hires receive a less generous package than existing employees.
The clamor for deep-rooted pension reform is supported by a vast majority of Californians. A generation of public employees earning less money and benefits coexisting with those making far more appears to be the path sought by weak-kneed political expediency and a slight defeat for proponents of labor.
PHOTO: Members of the California Assembly in chambers.