Governor Brown’s pension reform “outline” is out. California is certainly in desperate need of pension reform. Heck that was true back in 2005 when Reason called out the crisis before anyone was paying attention.
But Brown’s proposal falls well short of the mark, in several ways.
First, as John Fleischman quicly pointed out, it does nothing to address the state’s huge unfunded pension liability.
Second, some of the proposed reforms appear to require changes to current bargaining agreements, like getting rid of all 3 percent formulas. So the “reform” can pass the legislature, but get tossed by the courts for violating existing bargaining agreements. Brown can say “I passed reforms, but the courts threw them out.”
Third, I agree with John that nothing in the outline appears to be permanent. The next legislative session could overturn any or all of these reforms. Judging by the state legislature’s track record of giving the union’s anything they want, and reneging on legislative deals to constrain spending, there is no reason to expect anything different this time around.
In fact, the whole thing looks fishy. The government worker unions in CA have consistently opposed anything like these reforms. Now going into an election Brown and the legislature are going to stand up to them? When they are most vulnerable to the kind of election pressure the unions bring to bear?
Ahh, but see, there is Proposition 30 on the table, Gov. Brown’s big tax increase initiative. Most of the unions support it, and a good show of “reform” buys a lot of credibility with voters for the the arguments that the tax increases will fund a new, reformed state government. But if those reforms can be unwound by the next legislative session, suddenly union quiescence makes more sense. Get the tax increase passed with some sham pension reforms, then unwind the reforms next year. Win win for unions and politicians, lose lose for taxpayers.
Stay in Touch with Our Pension Experts
Reason Foundation’s Pension Integrity Project has helped policymakers in states like Arizona, Colorado, Michigan, and Montana implement substantive pension reforms. Our monthly newsletter highlights the latest actuarial analysis and policy insights from our team.