O.C. Watchdog: Even though public workers paying more into their pensions, shortfall still growing
Public workers are kicking in more to fund their retirements, helping to stabilize the burden borne by California’s cities.
The gaping hole at the bottom of California’s public pension funds grew monstrously nonetheless.
New figures from the state controller show glimmers of light escaping from an otherwise oppressively dark cloud. California’s 470-plus cities spent just a half-percent more on retirement costs in 2014 than they did in 2011, almost entirely because cities drastically reduced what they paid to pick up their employees’ required share of pension costs.
That’s the fruit of union contracts where workers agreed to shoulder more of the load.
“No one cares more about the sustainability of retirement funds than the state’s teachers, firefighters and other public workers,” said Steven Maviglio, spokesman for Californians for Retirement Security, a coalition of public employee unions. “They are paying more for benefits than ever, while seeing them scaled back.”
But, despite such efforts, the gap between what public agencies have promised to pay workers upon retirement, and what we actually have, continued to grow.
The hole is called “unfunded liabilities” in accountant-speak. And the total for all of California’s public pension systems skyrocketed 3,710 percent in just a dozen years – from $6.3 billion in 2003 to $241.4 billion in 2014, according to the latest figures from the state controller.
The hole grew nearly 22 percent between 2013 and 2014 alone.
“What a record!” said Chuck Reed, Democrat and former mayor of San Jose, who is aiming a pension reform initiative at the 2016 ballot.
Reformers argue that this hole matters to all Californians, because if it isn’t filled up with meatier investment earnings and heftier contributions from public workers and employers alike, taxpayers will have to fill it directly.
Why? Because in California, the promises made to public workers on Day One of their employment can never, ever be broken – at least, not outside of federal bankruptcy court. And even in court, officials from Vallejo and Stockton and San Bernardino did not ask to scale back these burdens, fearing they’d have trouble attracting and retaining workers.
PERSPECTIVE?
Public labor unions bemoan the “pension bogeyman,” and argue that unfunded liabilities can be misleading.
Those are not hard-and-fast numbers reflecting fixed debt, Maviglio has said. They change, depending on many moving parts and assumptions, including how long people are expected to live and projected annual returns on investments.
When the market booms, returns are great and liabilities get smaller. When the market tanks, returns shrink and liabilities grow.
“Cropping the picture for one or even three years always is dangerous,” Maviglio said. “As any financial advisor will tell you, you need to look at the big picture. And if you do that, returns and expenses are relatively stable.”
California’s pension systems are, indeed, starting to factor for longer lives and less-stellar investment returns: Public agencies – and workers – are paying 30 to 50 percent more a year into the pension kitty now than they were just a few years ago, and will keep paying at this rate for years to come.
The numbers will be subtracted from public agencies’ balance sheets beginning next year. Some city officials in particular are bracing for this, as it could make a few municipalities appear insolvent. That is, their total liabilities will exceed their total assets, at least on paper.
The expected shock of this exercise might work to the pension reformers’ end.
BALLOT FIX?
A pair of initiatives by Reed and former San Diego councilman Carl DeMaio, aiming for the November 2016 ballot, try to address the problems.
The Voter Empowerment Initiative would require voter approval for guaranteed pensions for new public workers, as well as voter approval for pension increases for current workers.
The Government Pension Cap Act would limit public agency contributions to new workers’ retirement accounts to 11 percent of base compensation, up to 13 percent for public safety workers. Many agencies now pay about 20 percent for regular workers, and more than 50 percent for public safety workers.
Reed and DeMaio say local governments need more tools to help rein in unsustainable pension costs that siphon dollars away from services for regular citizens. Opponents say they would gut public pensions and eliminate guaranteed retirements across the board.
Reformers keep playing an initiative cat-and-mouse game with the Attorney General, who keeps giving the measures titles and summaries that they consider the kiss of death. They only plan to put one initiative on the ballot. Supporters have six months to submit signatures to qualify for November’s ballot.
In a survey released in September, the nonpartisan Public Policy Institute of California found that the majority of voters favor changing the pension system for new public workers – 72 percent of likely voters said the amount of money spent on public pensions is a problem, and 70 percent said voters should have a hand in pension decisions at the ballot box.
But pollster and political consultant David Binder Research found that support for the two initiatives was far lower, around 42 percent. Binder surveyed likely voters, and released results last week.
Dave Low, chair of the union coalition Californians for Retirement Security, pronounced the reform initiatives “dead in the water.”
Reformers disagree.
“Of course the unions opposing pension reform will manufacture inaccurate polling numbers to distract from our momentum,” DeMaio said. “Our internal polling – and all publicly available polling by independent third parties – show California voters overwhelmingly favor pension reform.”
Workers pitch in
California’s 470-plus cities are picking up less of the workers’ share of pension costs as workers pick up more. But unfunded liabilities in California’s public pension systems continue to skyrocket.
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https://www.ocregister.com/articles/public-696676-pension-workers.html