By Dan Walters
12/14/2014 12:01 AM
California’s perpetual political debate over public employee pensions usually focuses on the benefits themselves – whether they are fair compensation for those doing the public’s work or, conversely, too generous.
Pension benefits obviously played a big role, but by themselves did not create multibillion-dollar gaps in the California Public Employees’ Retirement System or other big state and local pension trust funds.
The more egregious error was the cowardly failure of politicians to pay for the benefits they were so eager to provide, pretending that high-flying investment earnings would cover them with no cost to taxpayers.
The classic example was Senate Bill 400, the 1999 measure that sharply expanded pensions for state workers – retroactively.
Then-Gov. Gray Davis and legislators found political cover in assurances, later proven false, from CalPERS that the new benefits would cost taxpayers nothing.
That scenario was repeated hundreds of times in cities and other local governments as unions pressed their governing boards to match the state. But CalPERS’ assurances collapsed when its investments were hammered in the recession and it raised mandatory contributions to cover its losses.
Had local officials ignored CalPERS’ false promises, acknowledged that the new benefits would be costly and modestly hiked pension fund payments to cover them, the later impact, including bankruptcy filings by three cities, might have been averted.
Ignoring pensions’ long-term costs has consequences, as illustrated by what it’s taking to close a $74 billion shortfall in the State Teachers Retirement System.
Governors and legislators dithered for years as the gap widened by millions of dollars a day. Finally, however, Assembly Bill 1469 was enacted this year, boosting contributions into STRS by school districts, teachers and the state to close the gap over 32 years.
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