'Pension
Truth Squad' is short on
truth and long on
delusions
TO hear the union-front Californians for
Retirement Security tell it, the pension crisis
bedeviling local governments up and down the
state either isn't real or is grossly exaggerated.
Press releases from veteran Sacramento union
operative Steve Maviglio decry "myths and
falsehoods about public employee pensions"
spread by malignant "out-of-state billionaires"
who want to use "a few sensational cases of
pension abuse" as a means to "attack middle-
class Californians."
But Maviglio, union leaders and Democratic
lawmakers behind what they call the "Pension
Truth Squad" know full well the crisis is real.
That's why they are pushing hard for AB 506,
which recently passed the Assembly on a party-
line vote.
The measure would block reeling local
governments from filing for bankruptcy
protection - a likely first step toward attempts
to invalidate contracts locking in unaffordable
with attempts to pretend the pension crisis is a
figment of everyone's imagination. They have no
choice.
They have to balance budgets and realize that
what the Maviglios of the word depict as a battle
between the beleaguered middle class and "out-
of-state billionaires" is actually a math problem:
Incoming revenue isn't sufficient to cover both
worker compensation and basic public services.
Consider San Jose Mayor Chuck Reed, a politician
with impeccable liberal Democratic credentials.
In an extraordinary interview published in the
May 22 New York Times, Reed (no relation)
warned that unless pension formulas are
changed for city workers, San Jose is headed for
a cataclysm. Pension costs will force the city to
lay off nearly two-thirds of its 4,200 workers and
to shift to "a volunteer fire department, a mostly
volunteer police department, and not much else,"
with almost all libraries and recreation centers
shuttered. Driving Reed's despair: the fact that
all of his city's politically powerful public
employee unions except the police union pretend
the pension crisis is "imaginary," in his words.
Maviglio must be proud.
If only there were a real "Pension Truth Squad," it wouldn't just acknowledge such grim fiscal realities. It would also note that the original rationale for public sector employees getting far better retirement benefits than those in the private sector - because their pay is so poor they can't save for retirement - is no longer remotely true.
And perhaps the scariest fact that a real "Pension Truth Squad" would point out is that as daunting as official estimates of unfunded liabilities may be, plenty of experts think the actual liabilities are far higher. A 2010 Stanford University study asserted that the three largest state pension funds could be underwater by more than $500 billion, but that unrealistically rosy projections of long-term earnings made the problem seem much smaller. And even the smaller problem that pension funds admit to is often deceptively minimized by a practice known as "smoothing," in which the funds put off sharp increases in the assessments they charge local government clients - done to promote the illusion all is well with pension finances.
All is not well. After looking at the enormity of California's crisis, here's what a real "Pension Truth Squad" would conclude: We're bleeped.
Chris Reed is an editorial writer for the San Diego Union-Tribune and a talk-show host on KOGO 600 AM.
Truth Squad' is short on
truth and long on
delusions
TO hear the union-front Californians for
Retirement Security tell it, the pension crisis
bedeviling local governments up and down the
state either isn't real or is grossly exaggerated.
Press releases from veteran Sacramento union
operative Steve Maviglio decry "myths and
falsehoods about public employee pensions"
spread by malignant "out-of-state billionaires"
who want to use "a few sensational cases of
pension abuse" as a means to "attack middle-
class Californians."
But Maviglio, union leaders and Democratic
lawmakers behind what they call the "Pension
Truth Squad" know full well the crisis is real.
That's why they are pushing hard for AB 506,
which recently passed the Assembly on a party-
line vote.
The measure would block reeling local
governments from filing for bankruptcy
protection - a likely first step toward attempts
to invalidate contracts locking in unaffordable
with attempts to pretend the pension crisis is a
figment of everyone's imagination. They have no
choice.
They have to balance budgets and realize that
what the Maviglios of the word depict as a battle
between the beleaguered middle class and "out-
of-state billionaires" is actually a math problem:
Incoming revenue isn't sufficient to cover both
worker compensation and basic public services.
Consider San Jose Mayor Chuck Reed, a politician
with impeccable liberal Democratic credentials.
In an extraordinary interview published in the
May 22 New York Times, Reed (no relation)
warned that unless pension formulas are
changed for city workers, San Jose is headed for
a cataclysm. Pension costs will force the city to
lay off nearly two-thirds of its 4,200 workers and
to shift to "a volunteer fire department, a mostly
volunteer police department, and not much else,"
with almost all libraries and recreation centers
shuttered. Driving Reed's despair: the fact that
all of his city's politically powerful public
employee unions except the police union pretend
the pension crisis is "imaginary," in his words.
Maviglio must be proud.
If only there were a real "Pension Truth Squad," it wouldn't just acknowledge such grim fiscal realities. It would also note that the original rationale for public sector employees getting far better retirement benefits than those in the private sector - because their pay is so poor they can't save for retirement - is no longer remotely true.
And perhaps the scariest fact that a real "Pension Truth Squad" would point out is that as daunting as official estimates of unfunded liabilities may be, plenty of experts think the actual liabilities are far higher. A 2010 Stanford University study asserted that the three largest state pension funds could be underwater by more than $500 billion, but that unrealistically rosy projections of long-term earnings made the problem seem much smaller. And even the smaller problem that pension funds admit to is often deceptively minimized by a practice known as "smoothing," in which the funds put off sharp increases in the assessments they charge local government clients - done to promote the illusion all is well with pension finances.
All is not well. After looking at the enormity of California's crisis, here's what a real "Pension Truth Squad" would conclude: We're bleeped.
Chris Reed is an editorial writer for the San Diego Union-Tribune and a talk-show host on KOGO 600 AM.
