Public Borrowing for Union Benefits: Brown Still Not Scaling Wall of Debt
Gov. Jerry Brown continues to pose as an iconoclast who is willing to make the tough choices necessary to keep California afloat, but his new budget is more evidence that he remains the cat’s-paw for the state’s public-sector unions.
“I want to advance the progressive agenda,” Brown said at the news conference unveiling his supposedly balanced budget, “but consistent with the amount of money people made available … I respect and embrace my role of saying ‘no.'”
But he certainly has said yes to union demands. The budget is the culmination of Brown’s campaign to convince Californians to raise taxes on themselves. They complied by approving Proposition 30, supposedly to help the school kids. Brown has played games with that money – earmarking part of it for union pay hikes as payback for labor support in getting Prop. 30 passed, according to GOP leaders.
But the biggest problem is the budget’s unbelievable failure to grapple with the tsunami of debt rolling toward Sacramento. For the past decade, California officials have been ramping up pay and benefit packages for public employees, creating a level of enrichment that is almost hard to believe.
The ranks of what has been dubbed the $100,000 Pension Club are growing rapidly. California public employees receive far more in pay and retirement compensation than those in other states, according to a series of stories by Bloomberg News. We have public employees walking away from the job at age 50 with initial six-figure payouts and pensions that could pay them millions over their lifetimes. While legal, it’s obscene – especially considering the meager retirements that so many private-sector workers face.
The unions want us to ignore the problem, and they oppose even modest reductions in promised benefits. Brown has complied, but has left the state’s taxpayers in a precarious position.
A fix would not be difficult from an actuarial perspective. Many good progressives have floated reasonable pension reforms that simply pare back the benefits going forward and eliminate pension-spiking gimmicks, double-dipping schemes and other unfair game-playing. Brown need only live up to his own rhetoric of “fiscal restraint,” and he could have a stunning legacy.
But he refuses to get serious about the debt issue even though the current system is unsustainable. Sure, California still can afford the annual payments on those pension promises, just as most people on the edge of bankruptcy can still afford the minimum monthly payment on their maxed-out credit card. But what about what Brown has called the “wall of debt”?
” presented a timeline for repaying nearly $28 billion the state owes to government programs that it raided for cash or deprived of funds over the years,” reported the Los Angeles Times. “But numerous reports by state agencies, think tanks and academics have shown the wall of debt to be many stories higher than $28 billion – hundreds of billions of dollars over the next few decades. Brown’s repayment plan does not significantly reduce the sizable debt to Wall Street or account for promises the state has made to its current and future retirees but is not setting enough money aside to cover.”
Brown has always talked a good game about reform. Last year, he proposed a solid pension-reform plan, but expended no political capital to promote it. When Prop. 30 appeared in danger, Brown and Democrats in the Legislature hobbled together superficial reforms to help the then-languishing Prop. 30 campaign, but that was more about politics than fiscal reform.
In 2011, in the thick of the state’s budget problems, Brown “negotiated” an unconscionable giveaway to the prison guards union, once again enriching some of the best-paid workers in the nation at the expense of the high-minded ideals he claims to champion. At the time, I wrote that Brown was a “prisoner of the union.” Nothing much has changed since then.
By approving Prop. 30, the state’s voters have assured further delays in addressing the state’s real fiscal problems.
Crisis is the only thing that has driven reform in Sacramento, and now that the state says it has extra money there won’t be any impetus for fundamental reform. We can at least hope that Brown makes good on his promise to put the kibosh on any big new spending programs pushed by the newly empowered Democratic legislative supermajorities.
People adjust their behavior, shift their investments and even move away if tax authorities and regulators pushed them too hard. Expect more deficits if the state doesn’t begin to treat its job creators more fairly.
California is a wonderful place, and it still can have a bright future, but only if is leaders face up to fiscal reality and stand up to the insatiable public-sector unions. Some people thought the supposedly iconoclastic Brown would be the one to do that in a “Nixon goes to China” way. They were wrong. Perhaps new, more courageous leaders will emerge.
Steven Greenhut is vice president of journalism at the Franklin Center for Government and Public Integrity. Write to him at steven.greenhut@franklincenterhq.org.