Dan Walters

Dan Walters: A new state budget that ignores pension and health care debts is not responsible

Dan Walters
Dan Walters

Assembly Speaker John A. Pérez summoned reporters to the Capitol last week to unveil what he called a “blueprint for a responsible budget.”

Pérez stressed his intent to create a reserve against future economic downturns and while the outline included billions of dollars in additional spending, mostly on education, health and welfare services, he didn’t let that word cross his lips, instead calling it “investment.”

When Pérez had finished his presentation, reporters asked questions, and one of them was whether his concept included any money to ease ever-increasing deficits in the teacher retirement system and mounting obligations for retiree health care.

These are no small matters.

The California State Teachers’ Retirement System (CalSTRS) told Gov. Jerry Brown and legislators months ago that it needs another $4.5 billion a year from someone – the state, school districts or teachers – to avoid insolvency in future years. And the CalSTRS deficit is growing by millions of dollars each day.

Meanwhile, it’s estimated that the deficit to cover health care promises to retired state employees is approaching $50 billion and also continuing to grow.

And what was Pérez’s response? Just short of silence. He muttered something about having a discussion about the issues sometime in the future, but that was it.

Putting $4.5 billion more a year into teachers’ retirements and setting aside a prudent amount to cover health care would more than erase the $5.6 billion surplus that Legislative Analyst Mac Taylor has projected for the 2014-15 fiscal year, leaving nothing for the new spending that Pérez envisions.

That arithmetic fact, therefore, tells us that the Pérez plan is anything but responsible.

One wonders whether the 2014-15 budget that Brown will propose in January will be any better.

Brown has talked a good game about fiscal responsibility and vowed to eliminate the state’s “wall of debt.” His aides talk about the new budget’s paying down debt and creating a “rainy day” reserve – the same kind of happy talk that Pérez was uttering.

The governor is less likely to embrace billions of dollars in new entitlement spending that the speaker proposes, but whether he’s also willing to bite the bullet on those longer-term debts is uncertain.

So far, his definition of debts, like Pérez’s, has been narrowly confined to those run up to cover recent operating deficits in the budget.

An improving economy and revenue from a temporary sales and income tax hike approved by voters last year will apparently produce a windfall of extra money in the next half-decade or so – the rest of Brown’s second governorship if he wins another term next year.

If Brown is serious about making the state fiscally healthy, as he claims, he’ll do something about those mounting long-term debts.