Dan Walters

Opinion: Big pension gap won’t vanish soon

State Controller John Chiang performed an admirable public service by publishing a detailed report on the finances of California’s public employee pension systems.

The most eye-popping fact in the report is that the “unfunded liabilities” of those systems exploded from $6.3 billion in 2003 to $198.2 billion in 2013.

Why? It was a perfect storm of irresponsibility.

Benefits were increased, contributions from governments and employees were cut back on assertions that high earnings on investments would pick up the cost, and speculative investments tanked during a severe recession.

Those unfunded liabilities – in effect, long-term debts – will haunt state and local governments for decades as other forms of public spending are squeezed to cover the immense pension gap, even if those in charge are loath to admit it.

The University of California, for instance, is planning to raise tuition by 5 percent a year over the next five years, saying it’s needed to maintain academic quality. But The Sacramento Bee’s Alexei Koseff revealed a big reason the money is needed is to cover UC’s pension fund shortfalls.

Two California cities, Stockton and San Bernardino, declared bankruptcy largely because of crushing pension obligations, but neither intends to seek pension relief even though Stockton’s bankruptcy judge says they could. And now one Stockton creditor is appealing that refusal to a higher federal court.

Many other cities are feeling the pension crunch, and while they may not file for bankruptcy, they are being compelled to chop other spending to make payments to the California Public Employees’ Retirement System that in many cases have quadrupled – or raise taxes.

An extraordinary number of local tax measures appeared on the Nov. 4 ballot, and while those seeking tax hikes didn’t specifically mention pension costs in pleas to voters, they often cited police and fire services – politically astute, if disingenuous.

El Cerrito, for instance, sent out a “voter guide” to residents with photos of smiling children and police officers.

There was a pension referendum of sorts in San Jose, whose mayor, Chuck Reed, City Council and voters had approved a pension reform bitterly opposed by city unions. The unions spent more than $800,000 to defeat Councilman Sam Liccardo, a reform supporter, in his bid to succeed Reed, but Liccardo won.

It’s evident that Gov. Jerry Brown’s very weak pension reform legislation will not make a serious dent in the immense pension debt, nor will investment earnings.

CalPERS and other pension systems, including UC’s, want more money – a lot more money – from taxpayers, and that means the issue isn’t going away.

San Jose’s Reed, in fact, says he’s seeking millions of dollars in backing for a statewide pension reform ballot measure.

Call The Bee’s Dan Walters, (916) 321-1195. Back columns, sacbee.com/dan-walters. Follow him on Twitter @WaltersBee.

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