Public Employee Pensions: Sunshine at Last?

Last week this column talked about the explosive issue of public employee pension benefits and noted that beginning soon new rules would require government to account accurately for the future costs of those benefits.

Coincidently later last week Governor Schwarzenegger announced the formation of a new commission to study public employee benefits and their present and long term impacts on California. The Public Employment Post-Retirement Benefits Commission will have two major tasks; accurately accounting for the unfunded liability of not just pension benefits but retiree health care as well and second providing recommendations to state elected leaders on how to meet these obligations. The Governor has given the Commission one year to perform its duties.

What should ordinary taxpayers think of this Commission? Although it is too soon to tell there is both hope and concern.

Let’s look at the positive. First any action that draws more public attention to this important issue is good. For years taxpayer activists and the media have been sounding the alarm regarding the massive future costs we were foisting on future generations. Even mainstream media which is frequently perceived to have a liberal bias has done a fair job of exposing the scandals permeating our public employee retirement systems. Because these benefits compete with other government spending it is no wonder that calls to fix the problem have been heard from all points on the political spectrum.

Second there is undoubtedly a correlation between the Governor’s regained popularity and the chances of arriving at solutions that have real meaning. The Governor’s first effort in 2005 to tackle the problem of unfunded liabilities in our retirement systems was withdrawn because of a drafting ambiguity that allowed the unions to run a very effective campaign against it.

Third the meetings of the Commission will be held in public. Undoubtedly this will put even more sunshine on both the process and the substance of the Commission’s work. Not only will California taxpayers get an eye- and earful of information on the scope of the problem but the motivations of the various stakeholders will become glaringly transparent. Ordinary taxpayers have a general sense that public employee retirement benefits are far better than their own. Now they are going to see some real specifics.

A great deal of good can come from the Governor’s idea so what are some of the concerns?

First we are skeptical of commissions in general. More often than not the creation of a commission is simply a means to defer resolution of a politically sensitive issue. Moreover commissions are in a way an acknowledgement that our elected leaders have neither the skills nor political fortitude to confront an issue through the regular legislative process. Have not legislators proposed bills to deal with pensions and health benefits in the past? They have and those efforts did not get very far.

So let’s assume for now that the very failure to address this issue in the Legislature has spurred Schwarzenegger to try another way — a way that might be perceived as less partisan. Taxpayers should reserve judgment for now.

But there is another concern. Who will serve on this commission? Arnold has structured it so that he would select six members and the two legislative leaders would each choose three. Forgive our cynicism but we doubt that Fabian Nunez and Don Perata are going to appoint individuals who have the best interests of taxpayers in mind. Both receive major backing from the very public employee unions whose benefits will be scrutinized. We’d love to be surprised of course by good taxpayer-friendly appointees from these leaders but we are not holding our breath.

That means that Schwarzenegger must select his appointees very carefully. Six individuals with strong taxpayer business and accounting backgrounds are a must.

Lastly it appears that the recommendations of the commission will be non-binding. This raises the question of whether the product of this one year effort will simply be another report that gathers dust on the shelf.

We hope not. We hope that all those involved — from the Governor’s office the legislative leaders and the appointees — realize that meaningful solutions to this massive problem are in everyone’s best interests especially our children to whom we will be handing the bill.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest taxpayer organization — which is dedicated to the protection of Proposition 13 and promoting taxpayers’ rights.

This column appeared in The Orange County Register on 01/04/07.

To print or download a PDF version of this commentary click here.