Sacramento Bee: Columnist Dan Walters on LAO's pension reform report

Dan Walters: LAO gives clearer picture of California's public pensions

By Dan Walters

The Sacramento Bee

Published: Friday, Nov. 11, 2011 - 12:00 am | Page 3A

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The political Sturm und Drang over California's public employee pensions, like all emotional debates, has tended to obscure the underlying facts of the issue.

If nothing else, however, the report on Gov. Jerry Brown's pension reform plan that the Legislature's budget analyst released this week should give all combatants, and the public, a clearer understanding of the issue's financial and legal, if not political, parameters.

Its bottom line: State, local government and educational pensions in California are considerably more generous than those in other states. Their costs are growing factors in tight government budgets. Pension systems' unfunded future liabilities are troubling. Retiree medical costs are a similarly bothersome issue. However, there are tight legal limits on what can be done to reduce the pension burden in the short run.

The report sees Brown's 12-point pension reform plan as a good starting point, although lacking in some critical details and silent on such pithy issues as shortfalls in financing teacher pensions and retiree health care.

"Our overall perspective," the report concluded, "is that the governor's proposal is a bold one. It would result in substantial changes to the current public employee retirement benefit system, particularly for future employees. In our view, it would increase public confidence in state and local pension systems over the long term and bring public employees' retirement benefits more in line with those of private-sector employees."

Does that mean that politicians, public employee unions and outside advocates of change will now calm down, give the governor's plan the attention it deserves and work toward some rational approach to what the analyst's report makes clear is a very real fiscal dilemma?

Not likely.

First of all, we don't know whether Brown is serious about pension reform or releasing his plan is merely a way of technically complying with a campaign promise. When pressed about his intentions by reporters, he responded with a litany of issues – equally difficult issues – that he appears to rank higher, such as the state's budget deficit, realignment and water.

Secondly, conservative backers of a stronger pension reform are trying to put their measure on the 2012 ballot, which would mean all-out war with the unions and, if the measure passes, a protracted legal battle.

Finally, union leaders deny that there's a major pension problem, say they've already agreed to enough changes, and often revert to the mantra that pension benefits cannot be abrogated and government officials should just pay for them as promised, whatever the cost, even if the lofty investment returns on which they count fail to materialize.

The new pension report is being denounced by both factions, which indicates that it is straight talk about the real issues at stake.