Democrats Are Undoing California’s Pension Reforms. Why Are Republicans Going Along With It?

During my adult life, Republicans have made the same pitch: Vote for them to get control of outrageous government spending and restore fiscal discipline. Yet with Republicans in control of both houses of Congress and the presidency, the feds hit a fiscal milestone: $40 trillion in debt. The country is setting new spending records however you cut and slice it.

“Publicly held debt—now approaching World War II levels at about 100% of the country’s annual GDP—was just 31.5% of GDP in 2001,” The Wall Street Journal reported. Both parties deserve blame, with each one spending wildly on different priorities. I’m picking on Republicans because of their tired rhetoric about reining in spending. Anyone who believes them at this point is gullible.

This column isn’t about the federal fiscal disaster, but the one in California. Democrats get the lion’s share of brickbats given that they have controlled every state constitutional office and have held supermajorities in the Legislature for years. Four years ago, California enjoyed an astounding $97.5 billion surplus, but now the supposedly “balanced” budget faces an intractable structural deficit, according to the Legislative Analyst’s Office.

California Republicans issue their usual statements rightly complaining about out-of-control spending, but when it matters they eagerly join the Democrats in vastly hiking spending. I’m not giving Democrats a pass, but at least we don’t have to listen to them prattle about budget restraint.

The latest budget-busting bill in Sacramento is Assembly Bill 1383. A union giveaway, it would obliterate the reforms that former Gov. Jerry Brown assembled during the 2011 budget crisis. At the time, spending on massive pensions for public employees—especially public safety officials—was consuming larger chunks of the state budget and pushing localities to the brink of bankruptcy. This was a modest bill, but a good one.

Because of the so-called California Rule, governments here cannot reduce pension benefits for existing employees. No lawmakers ever proposed slashing existing retiree benefits or even cutting the accrued benefits of current employees. But in the private sector, companies can reduce the pension formulas going forward—i.e., starting tomorrow. California forbids such changes for public employees, so that ties lawmakers’ hands as pension debts soar.

Brown argued the state can get control of its soaring pension debts by reducing the formulas for new hires only. The thinking was sound: In around 15 years, the state would be on a sustainable path as lower-formula new hires would replace higher-formula workers and retirees would pass away. The reforms are now doing their job, but the unions want to gut Public Employee Pension Reform Act savings by lowering the retirement age and increasing the pensionable benefits cap. Just as PEPRA is working, lawmakers want to gut it.

The premise is based on a myth. As the Reason Foundation notes, California is not facing a public-safety retention crisis. The rate is similar to what it always has been. There are still long lines for firefighter jobs. One need only look at Transparent California to see the eye-popping pay and benefit levels—often well above $500,000—earned by California police and firefighters. The new benefit will cost the state dearly and fall particularly hard on local governments, which have been cutting services and raising taxes to pay their escalating pension bills.

In 1999, Senate Bill 400 sparked that 2011 crisis by dramatically increasing California Highway Patrol pensions. Unions and their allied lawmakers knew that after boosting CHP pensions by as much as 50 percent retroactively, most other state and local agencies would follow suit. Likewise, AB 1383’s supporters focus on police, but they know these changes will spread. During the SB 400 debate, the California Public Employees’ Retirement System (CalPERS) claimed SB 400 wouldn’t cost taxpayers a dime—but they were off by billions and billions of dimes.

California Democrats are the party of government and unions, so their support is wrong but expected. But where is the party of fiscal responsibility? Republicans don’t have much power, but they could be sounding the fiscal alarm bells before the state embarks on yet another fiscal disaster. They could echo Jerry Brown, who routinely warned that recession is always around the corner. Instead they are tripping over themselves to support AB 1383.

Most Republicans also are supporting Assembly Bill 1054, which would allow these highly compensated employees to retire with giant lump-sum payouts. Deferred Retirement Option Plans allow retirees to keep working after they hit their retirement agents. The existence of DROPs points to the real reason for any alleged retention crisis: Retirement formulas are so generous that they incentivize public employees to retire early, even if they want to keep working.

The only “no” votes on AB 1383 so far are Assemblyman Carl DeMaio (R–San Diego) and Assemblyman David Tangipa (R–Fresno). DeMaio is the only “no” vote on AB 1054. If any other Republican legislators prattle about fiscal responsibility, you can just laugh out loud.

This column was first published in The Orange County Register.