At long last, a start for reform in public pensions

I realized the other day that my family recently passed our 15th anniversary since we moved to South County from the Midwest, and that I’m approaching my 10th anniversary of writing opinion columns for the local paper. How time flies when you’re stirring the pot.
During my decade of opining in print, I’ve tried to evaluate arguments and take stances based on the merits of the issue in question, regardless of how any particular political party or politician felt.
That means that I’ve sometimes pleased those on the right – by supporting redistricting reform and private property rights and opposing eminent domain on behalf of developers, for example. That means that I’ve often pleased those on the left – by supporting reproductive rights, marriage equality, and separation of church and state, and opposing union busting, for example.
All of that is context for my stance on an issue that I know will anger many on the left: I support public employee pension reform, and applaud Gov. Jerry Brown for his politically courageous efforts on this important issue. I don’t agree with every detail of his plan, but it is a brave and much-needed step from a Democrat on an issue that we cannot continue to ignore.
Let’s remember the importance of intellectual honesty: Just like most Democrats properly argue that Republicans should ignore, for example, their significant monetary support from Wall Street firms when considering financial industry regulation and instead consider the greater good, I hope that Democrats will ignore their significant monetary support from labor unions when considering public employee pension reforms and instead consider the greater good.
 The fact is that the current public employee pension system is unsustainable. As Microsoft founder Bill Gates noted recently, the situation is exacerbated by the current recession, but even lacking that recession, the current system is a prescription for bankruptcy: “There are long-term problems with state budgets that a return to economic growth won’t solve. Healthcare costs and pension obligations are projected to grow at rates that look to be completely unsustainable.”
Because we’ve ignored this problem, we’re now making choices between libraries and pensions, public schools and pensions, state universities and pensions, services for the physically and mentally disabled and pensions, infrastructure and pensions, prisons and pensions, parks and pensions.
David Crane, who served as special advisor to former Gov. Arnold Schwarzenegger, wrote in a guest column for the Los Angeles Times that California diverted “$5.5 billion … from higher education, transit, parks and other programs in order to pay just a tiny bit toward current unfunded pension and healthcare promises” in 2010. Similar funding diversions are occurring at all levels of government.
But there’s another important reason to reform the public employee pension system: It’s simply unfair to ask one group of citizens – private-sector workers – to pay for a benefit for another group – public-sector workers – that the first group largely cannot get.
Most public-sector workers have defined-benefit pension plans in which benefits are guaranteed no matter what happens to the investments the pension plan makes. If the plan investments can’t cover benefits, taxpayers must cover the difference. Of the private-sector employees who have any pension plan at all, most have defined-contribution plans, like 401k plans, in which benefits are not guaranteed and depend on the results of pension plan investments.
According to the Center for Retirement Research (CRR) at Boston College, in 2004, 80 percent of public-sector workers participated in defined-benefit pension plans, compared to 10 percent of private-sector workers.
What’s more, as the CRR notes, “Public defined benefit plans tend to provide larger benefits than their private sector counterparts, and most offer post-retirement cost-of-living adjustments, which are virtually unheard of in the private sector.”
We’re currently seeing nationwide protests rightly decrying the unfair differences between the 99 percent and 1 percent based on income growth disparities. I’m waiting for the protests decrying the unfair differences between the haves and have-nots based on pension plans.
In a perfect world, everyone would have defined-benefit pensions. But we don’t live in a perfect world. We live in a flat world where Americans compete for jobs with people all over the globe willing work for less money and fewer benefits.
Like it or not, reforming the public employee pension system is long overdue. It’s not enough to reform it at the state level; reform is needed at the federal and local levels, too. Congratulations to Gov. Brown for making a good start.