Panelists answered the following: In light of bankrupted Detroit proposing to slash pension benefits by up to 34%, should California cities be given broader leeway to roll back such retirement benefits?
Nants Foley: “For many years we wrote blank checks in this area. People are working longer so someone could easily work 20 years at two jobs and get a great retirement from both. With everyone living longer these become a financial albatross. However it is extremely difficult to change the rules in the middle of the game!”
Jim West: “No. Public employee unions won those pensions benefits through negotiations with elected officials. Years ago our elected officials made a Faustian bargain to save their political jobs by surrendering completely to union demands. Unions understand politics – they can get you voted in and they can get you voted out – so handing out obscene retirement benefits was a way of insuring political jobs. Voters didn’t complain then so they can’t complain now.”
Richard Place: “You can give them all the leeway you want but they have to have the courage to face the problem. The problem is that they ask their staff if they would recommend cutting their pay. It’s not going to happen.”
Ruth Erickson: “Yes, because many cities and counties are feeling the strain of such high retirement benefits for public employees and administrators, that they too could go broke! Though agreements and contracts were made by elected officials and unions, they and the employees need to realize that if their employers have to declare bankruptcy or have to severely cut back, they may not have a job. Something has to give, and it shouldn’t have to come from the public.”
Mary Zanger: “No because a punishing choice like slashing benefits to reitrees puts less spending in circulation, slowing the economy and reducing income for the state. A better choice would be to work the other end of the fund by boosting contributions from those in the system even though these contributions are already higher than social security rates. The best choice would be to feed the public sector not starve it. Grow public service to serve communities then see a fattened economy feed taxes to the state.”
Marty Richman: “No, the basic CalPERS contracts should be honored; however, most public agencies have hung all sorts of expensive gingerbread on them and they should repeal those vote-buying gifts as soon as contractually possible and change the entire system for future employees to share the risk or take a lower payment. Some of the gifts are highest single year, counting final cash-outs as wages, and paying an employee’s retirement premium. There are many more including counting wages that were never paid to the employee. The law should require public agencies to put the money in the funding pot and not just pass the enormous debt on until the politicians responsible are out of office. In 2010 9,812 California public retirees received at least $100,000 a year in pensions, one year later the number was 12,199. Most retirees do not get that much, but more than 70,000 received between $50,000 and $500,000 annually, they alone cost $5 billion a year. This week’s LA Times reported the state teacher’s pension fund was short $71 billion and accumulating additional debt at the rate of “$22 million every day.”
