Public Pensions Drawing More Scrutiny

Just yesterday, I posted New Database for California Public Employee Salaries and said:

As unemployment rises and wages fall, we as a society will look for groups or individuals to blame. They will be tarred and feathered. Realtors, mortgage brokers, politicians, and greedy public employees gaming the system to pocket tax-payer money.

As social mood continues to darken, expect great reporting like this to increase…and the public floggings to get more brutal.

Within hours, the Sacramento Bee reports Dan Walters: California public pension costs and angst both increase

As California’s economy continues to decline, as the ranks of the unemployed continue to swell and as private employers trim salaries and fringe benefits, public worker unions are becoming worried about a backlash that would hit their retirement plans.

Gov. Arnold Schwarzenegger is renewing his call for public pension reform and received an unintentional but major boost recently from Ron Seeling, the chief actuary for the California Public Employees’ Retirement System.

Seeling told a Sacramento seminar, “I don’t want to sugarcoat anything. We are facing decades without significant turnarounds in assets, decades of – what I, in my personal words, nobody else’s – unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) … unsustainable pension costs. We’ve got to find some other solutions.”

Seeling didn’t know that an Internet blogger, veteran reporter Ed Mendel, was in the audience and would quote him. And as Seeling’s comments have echoed, they have undercut the official CalPERS stance that no major systemic changes are needed.

…

Nearly two decades ago, when the state was mired in recession, Republican Gov. Pete Wilson persuaded the Legislature to adopt a two-tier retirement system under which newly hired state workers would receive lower benefits when they retired. A few years later, with Democrat Gray Davis in the governorship, the two-tier plan was scrapped and state pension benefits were boosted sharply on an assurance from CalPERS that they would not spark any increase in state payments.

That turned out to be grossly untrue, but returning to a two-tier system, or perhaps freezing current benefits and shifting to a 401(k)-type supplement, may be the only reform options. And those changes would do almost nothing to reduce the burden on taxpayers for decades.

It’s another fine mess born of making expedient political decisions without considering their long-term consequences.

Indeed. The foxes have been in charge of the hen-house, but because there has been enough prosperity to go around, we never became outraged. While taxpayers were busy remodeling our kitchens, politicians and unions robbed them.

This is just one more example of unsustainable excess during our bubble-years. And, like home values and stock values, public employee benefits must drop to sustainable levels before we can begin any real recovery.