Let's See if we can dupe the Taxpayers

http://www.latimes.com/news/local/la-me-pensions30dec30,0,2127262,full.story?coll=la-home-local

This article is scary as it shows the politicians (whores for votes) have no back bone to stand up to either the taxpaying voters OR the public employee unions so they will let the unions take their campaign to the the voters to see if they can get the poor private sector voters to approve pension plans worth two to three times what their own private sector pensions are worth! And knowing how stupid voters are in approving bonds (they don't cost taxpayers right?!) they will give billions away to very un-deserving public employees. Are Californians as smart as taxpayers in New Jersey that have already caught onto this scam and are fighting for their lives (or their own future retirements) against the greedy union employees retiring at 50?

S.F. is seen as a model of -- restraint?
The city has controlled employee pension costs by putting plans to hike benefits to public votes.

By Evan Halper
LA Times Staff Writer

December 30, 2006

SACRAMENTO — San Diego flirted with bankruptcy. Orange County, still emerging from its mid-'90s cash crisis, moved back toward the brink. And in Fresno County, the grand jury recently declared that public employee retirement costs have that government "facing insurmountable debt in the near future."

Statewide, governments are rattled by the soaring price of public pensions expanded by politicians at the bargaining table and gobbling up an increasing share of taxpayer dollars. But a rare exception has emerged in an unexpected place: San Francisco.

Even as a bulwark of organized labor, the city has kept its pension costs in check while many others are digging deep into their general funds to pay for benefits that taxpayers were assured would cost nothing.

Why is San Francisco different? Politicians there can't give much away; a century-old provision in the City Charter prohibits it. The only group empowered to enhance government benefits is the public, which must sign off on changes in the municipal pension plans at the ballot box.

The provision was unique to San Francisco until last month, when San Diego voters overwhelmingly decided that they too would like a say in such matters. Now the gospel of voter oversight is spreading.

"There is no question that it has been a sobering force for any aggressive or ambitious union seeking to improve benefits," said former San Francisco Mayor Art Agnos. "They know they can't rely on the politicians who are anxious to please them. Any proposal ultimately goes to the voters. They are the ultimate bankers."

The city's officials say the rule has helped save San Francisco from itself in recent years. When other governments kept constituents in the dark about their actuarial assumptions — such as an unending stock market boom — as they raised pension benefits in the late 1990s, San Francisco officials had to explain exactly where the money for benefits would come from, and then get voters' permission.

In the last decade, residents there have approved at least four benefit increases — moderate ones.

"If you need to win a majority of voters, you are more careful what you ask for," said Claire Murphy, executive director of the city's retirement fund.

The only proposal voters rejected in that period was a 1996 initiative championed by former Mayor Willie Brown to give him the authority to cut deals with public employee unions on his own — without having to go to the ballot.

Not everyone is a fan of San Francisco's policy.

"Our preference would be to amend the charter so we wouldn't have to have voters involved," said Maria Guillen, regional vice president of Service Employees International Union Local 790 in San Francisco.

Guillen said that, although the public may be sympathetic to police officers and firefighters, getting voters to sign off on retirement benefits for other government workers is another matter. People aren't as eager to rush to the polls to support street sweepers and custodians, she said, and their benefits are falling far behind.

"We don't have the same public relations," she said. "We have a harder route. And these are the workers that do so much to make the city run."

Many pension fund managers also are skeptical.

"I don't think employee compensation issues should be subjected to the politics inevitably injected into any debate that includes a vote of the people," said Keith Brainard, research director for the National Assn. of State Retirement Administrators, "just as you wouldn't want people voting on how much water should be let out of a dam, or what neighborhoods police should patrol at night."

But he also acknowledged that the San Francisco model "looks like it's working."

The city's fund is on target to have more than enough money to pay all of the cash retirement benefits promised to its employees. Orange County and San Diego are short about 30%. That translates into billions of dollars, and residents could be forced to make it up by sacrificing services or enduring tax hikes. Scores of other local government funds also are struggling.

And the state's giant public employee pension plans are short tens of billions of dollars, despite impressive returns for pension funds from the stock market, real estate, venture capital and hedge fund investments in recent years.

Many experts blame politics. Elected officials, they say, want to reward government employees — and endear themselves to the politically powerful unions behind them — but don't want to confront taxpayers about the true cost of increasing benefits.

So they mask the price tag with overly optimistic investment projections and other maneuvers. It isn't until years later, when the higher benefits kick in or the stock market dips, that voters get the picture.

"No one is minding the store," said J. Fred Giertz, a professor of economics at the University of Illinois at Urbana-Champaign. "Politicians give out the benefit increases to keep the employees happy, and they also keep taxpayers happy because they can do it without raising taxes at that moment. But the burden gets passed on to the future."

Brainard, of the retirement administrators group, says the solution to runaway pension costs is not bringing every contract to the ballot, but bringing more transparency and oversight to the bargaining process.

He points to Georgia, which has strict rules in place to ensure that politicians cannot increase benefits without having the funds to cover the cost. Georgia is one of the few states not facing a large shortfall in its pension funds.

But in San Diego, where lack of disclosure about a multibillion-dollar tab for enhanced public pension benefits led to federal sanctions for securities fraud, voters decided that they wanted to go a step further. Last month, nearly 70% of them cast ballots in favor of putting the San Francisco model in place in their city. All future benefit increases must go through them.

Unions bitterly fought the proposal, saying it would cripple the city's ability to attract quality police officers and firefighters.

"San Diego already has one of the lowest ratios of police officers and firefighters per population in the state," said the ballot argument opposing the measure. "Proposition B will only make that problem worse."

Former San Francisco Mayor Agnos calls such arguments "purely special-interest rhetoric." He said his city has had no problem attracting job applicants.

Now activists hope Orange County will follow suit. One is George Passantino, a senior fellow at the libertarian Reason Foundation.

Passantino sees the irony of looking for solutions in the liberal city that activists such as him love to hate. But there is no denying it, he said: "San Francisco is way ahead of the curve."

evan.halper@latimes.com

*

(INFOBOX BELOW)

Public pension funding

Most of California's large public retirement funds lack enough money to cover benefits promised to government workers. But San Francisco's fund has a surplus.

Retirement plan Surplus/ Percent Value of
shortfall funded assets
(in billions) (in billions)
San Francisco +$0.42 103.8% $11.3
City of San Diego -1.4 68.0 3.6
City of Los Angeles -2.1 77.2 7.2
Orange County -2.3 71.5 5.8
Los Angeles County -5.6 82.8 27.0
California State Tchrs -20.3 87.0 157.0


Sources: National Assn. of State Retirement Administrators, Los Angeles City Employees Retirement System, Orange County Employees Retirement System, San Diego City Employees Retirement System.

Governor creates pension task force

California Gov. Arnold Schwarzenegger signs an order creating the Public Employee Post-Employment Benefits Commission in his hospital room in Santa Monica on Thursday.

Keith Matheny
The Desert Sun
December 29, 2006
http://www.thedesertsun.com/apps/pbcs.dll/article?Date=20061229

As President Bush did with the Iraq Study Group, Gov. Arnold Schwarzenegger is turning to a new assembly of minds for new ideas to address a worsening problem.

The new group's task: find solutions for California's fast-growing, budget-sapping public employee retirement benefit costs.

The new commission Schwarzenegger created will have six members appointed by the governor; three by the Assembly speaker and three by the president pro tem of the state Senate. The Democrats control both the Assembly and Senate. State Sen. Jim Battin, R-La Quinta, applauded the governor's move.

"You've got to sit down and have a realistic conversation," he said. "We cannot continue to operate the way we are. It will eventually bankrupt the state."

The group is to provide to the governor and Legislature by Jan. 1, 2008, a report that:

Identifies the full amount of unfunded post-retirement health care and dental benefits for which California governments are liable. It's estimated at $40 billion to $70 billion;

Evaluate and compare various approaches to address governments' unfunded retiree health care and pension obligations;

Propose a plan for addressing the unfunded obligations.

State Sen. Denise Moreno Ducheny, D-San Diego, the incoming chairwoman of the Senate Budget Committee, is cautiously optimistic about what may come from the new commission.

"I always get a little nervous when we're forming another commission," she said.

But employee pensions and retiree health care, she said, "is an issue we really need to look at.

"If we get good people and they hear good information, hopefully they will come up with something that they can present to us in the Legislature that we can use intelligently."

Costs dramatically rise
California state employees' pensions went from costing $160 million annually in 2001 to $2.6 billion this year. Unfunded pension liabilities for the California Public Employee Retirement Service, or CalPERS, and the California State Teachers Retirement Service, or CalSTRS, are at $49 billion.

A new accounting rule going into effect next year will require governments to more fully disclose their long-term retiree health care obligations. A state Legislative Analyst's Office report from February estimates that will reveal an unfunded liability of between $40 billion and $70 billion for state workers and their dependants.

The report recommends that the state set aside $6 billion a year, in addition to the $1 billion it currently spends on such costs.

Schwarzenegger, in his January 2005 State of the State address, touted as a cost-saving measure a state constitutional amendment to transition state employee pensions away from traditional, defined benefit plans to defined contribution plans such as 401(k)'s.

That effort was shouted down within a half-year, with critics including public employee unions arguing the reforms would wipe out orphan and widow death benefits for firefighters and police officers, an assertion Schwarzenegger and proponents denied.

Striking a more moderate tone since defeat of his special election measures in 2005, Schwarzenegger is now re-engaging the issue of public employee retirement costs with Democrats and union officials at the table.

"The governor wanted to continue looking at this issue very seriously, and wanted to do it in a bipartisan way," said Adam Mendelsohn, Schwarzenegger's deputy chief of staff for communications.

Union officials Thursday expressed willingness to work toward solutions.

Joe Kerr, president of the Orange County Professional Firefighters Association, noted that to address his department's retiree health care debt, the county contributed an additional $7 million; the union contributed $1 million; and employees agreed to forgo an annual 3 percent cost of living adjustment.

"It comes down to assisting your employer in being around, because if your employer isn't going to be around, it doesn't help employees any," Kerr said.

Though the commission is tasked with considering all options in dealing with the escalating benefits cost, one won't be supported by Schwarzenegger, Mendelsohn said - tax increases.

There's only two paths to take to reduce retiree health care liabilities: contribute more money or reduce the costs by reducing the benefits provided, said Jason Dickerson, the principal fiscal and policy analyst for the state Legislative Analyst's Office.

Both approaches are difficult and have political ramifications, he said.

"There are no easy answers here," he said. "These are difficult changes with a lot of dollars involved both for governments and public employees' families."

The Palm Springs City Council just last week agreed to use about $20 million in bonds to pay for its city's unfunded liabilities.

Riverside County borrowed $400 million through bonds to help pay off its retirement costs.

SOARING COSTS: PAYING FOR PUBLIC RETIREMENTS
The complete story

Alarming numbers
# The skyrocketing costs of retirement benefits for public employees will be a yearlong topic of discussion for a new commission formed by Gov. Arnold Schwarzenegger. Among the issues causing concern - including some first reported in a Desert Sun investigation published earlier this month:
# State retirement systems for government workers and teachers, CalPERS and CalSTRS, have a combined unfunded pension liability of $49 billion.
# California may owe between $40 billion and $70 billion in promised but currently unfunded long-term retiree health care for state workers. New accounting standards will soon require a full accounting for the long-term debt.
# Coachella Valley cities' pension savings were wiped out when the stock market crashed around 2000. Now they face a collective $51 million unfunded liability.
Cathedral City's population has increased almost 70 percent since 1990. Its emergency fire calls tripled in that time. The cost to run the city fire department jumped almost $1.7 million in the past five years alone.
# Yet the city's number of firefighters has remained virtually unchanged for nearly two decades because the costs of benefits prohibits them from hiring more staff.
# Palm Springs and Cathedral City fire departments often run engines with only two firefighters, instead of the recommended four or five. It can cause delays in responding to emergencies.
Coachella Valley's three school districts have a combined $114.5 million retiree health care liability.

JON COUPAL: Public retirees feast as others pay piper

Article reposted from LA Daily News opinion section 12/26/06
http://www.dailynews.com/theiropinion/ci_4904477

'TIS the season, and the ghosts of Christmas past, present and future are about to visit themselves on local governments as retribution for their wastrel ways.

Cities, counties and school districts have provided public employees a perpetual Christmas gift - consisting of lavish pensions and health care benefits - for years. But beginning soon, new guidelines by the Governmental Accounting Standards Board will require full disclosure of these unfunded government liabilities.

Since most California agencies operate on a fiscal year that begins in July, and they are not required to fully report until the end of the fiscal year, sticker shock will not actually hit the fan until 2008. But the tension in some administrative offices already is palpable. When taxpayers see what has been wrought by their elected representatives - and face higher taxes or service reductions to pay for retirement benefits that are often vastly superior to their own - the backlash will be severe.

According to Steve Frates of the Center for Government Analysis, annual health care costs in California for state and local government retirees are expected to total at least $4.5 billion this year. This figure could swell to $31.5 billion by 2019. In January, Frates will release results of a study of the other major unfunded government liability, pensions.

San Diego is the poster child for local elected officials' eagerness to give public-employee unions everything they want - even if they have to bend the law - to advance their own political security. Unrealistic promises to San Diego employees have put the city, known to many as "Enron by the Sea," on the verge of financial collapse.

In Orange County, John Moorlach, newly elected supervisor and former county treasurer, warns that recent generous pension agreements are pushing the county toward its second bankruptcy in a dozen years.

How did governments get themselves and taxpayers into this bind? Public employee unions go all out to elect "their" candidates to office. When it comes time to negotiate pay - the U.S. Census Bureau says California has the highest-paid public employees in the nation - and benefits, the unions have representatives on both sides of the table.

One of the few drawbacks to term limits is that elected officials who make these sweetheart deals will not be around long enough to face the consequences. They can approve these irresponsible deals and lock in union gratitude as they attempt to prolong their careers by seeking higher office.

And the expense to taxpayers will be more than just the cost of benefits. Just wait until government entities try peddling bonds and the rating agencies ask for their Governmental Accounting Standards Board number - or estimated liability. With these mammoth unpaid liabilities, the interest rate to lure bond buyers will be usurious, costing governments - and ultimately taxpayers - billions more.

Things are going to get much worse before they get better, but at least the new accounting rules will force our spendthrift representatives to confront fiscal reality and start working on solutions. Either that, or they will be tossed from office.

Jon Coupal is president of the Howard Jarvis Taxpayers Association. Contact him through the organization's Web site, www.hjta.org.