By Ron Cottingham
Too often, the world of government budgeting gets turned into a reality distortion field.
Case in point: San Jose Mayor Chuck Reed’s attempt to change the state constitution so that cities and counties are allowed to renege on the promises they have made to police officers, teachers, and other public servants.
When Reed filed paperwork earlier this month expressing his desire to put a ballot measure before California voters targeting public employees’ retirement accounts, his premise was that those pensions are “underfunded” in ways that make balancing government budgets difficult.
To be clear, “underfunded” would mean police departments can’t afford gasoline to put in their vehicles’ tanks. When teachers are handed pink slips, that’s evidence of a public school district being underfunded. When fire departments are forced to propose closing stations, that’s a proper use of the word “underfunded.”
However, when it comes to the retirements due to current public employees in the coming years and decades, that word has taken on a different meaning. Reed and other anti-pension crusaders are hoping California voters won’t notice their sleight of hand. Their claim is that the investment funds responsible for cutting those retirement checks in the future aren’t healthy enough to be able to do so. But they’re wrong.
The California Public Employees’ Retirement System projected investment returns in 2012 of 7.5 percent. Reed and his fellow anti-public worker crusaders jumped up and down screaming that that was too optimistic. They said a more realistic number was somewhere around 3 percent or 4 percent. Never mind that the investment system had earned an average of about 8 percent annually over the past two decades — a period that included the economic recession.
At the end of the day, CalPERS realized investment returns of 12.5 percent in 2012 — 167 percent of what was forecast.
It’s a bizarre distortion to claim that those numbers aren’t healthy.
So, in whose reality are public employees’ retirements a drain on governments’ budgets? The answer to that question might be found by looking at those financially backing anti-worker political campaigns. Take John Arnold, for example. According to his Arnold Foundation, he gave about $7 million in 2011 and 2012 to anti-pension efforts in multiple states, including California. He gave to Reed’s local ballot measure in San Jose (which remains, by the way, tied up in court) and, according to news reports, was asked to pony up the first $200,000 for Reed’s constitutional change.
Who is Arnold? He’s a billionaire former Enron executive and hedge fund founder. Most of us cannot fathom the “reality” he lives in nor imagine his motivation for focusing on public workers’ retirements.
Public servants in California are not wealthy people. On average, they retire with pensions amounting to $26,000 a year. That’s hardly luxury, especially after long careers earning less than they could have in the private sector and in many cases not even benefiting from Social Security.
Those who might latch onto Reed’s signature-gathering campaign ought to pay attention to a recent survey conducted by one of California’s most reputable pollsters. It says 64 percent of likely voters oppose breaking pension promises to current public employees. And that’s not a lopsided sentiment; it cuts equally across age, gender, and even political party — a near majority of Republicans even says any changes to pensions should not affect existing workers.
Taking a hard look at pensions promised to future public employees is fair game. That’s why unions in nearly 400 municipalities in our state have come to the bargaining table and agreed to concessions. It’s also why Gov. Brown’s pension reforms take a $100 billion hit to future pensions. But the only parties who stand to benefit from attacking current public workers’ retirement accounts are Wall Street moneymakers and billionaires like John Arnold. Voters shouldn’t stand for that kind of money-hungry bait-and-switch even making its way onto ballots in our state.
Copyright © 2013, UT San Diego