February 22, 2007

Twelve to study public pension costs

Given that this panel is chocked full of govt. employees and govt. union reps. LAAG sees very little progress via this "committee" on the pension shortfalls other than "Damn the private sector taxpayers....Full speed ahead towards the pension iceberg"

Editorial: Pension puzzle
New commission has its work cut out for it

Published February 23, 2007
Story appeared in EDITORIALS section, Page B6

Faced with a politically intractable problem, elected officials invariably turn to blue ribbon commissions -- panels of distinguished citizens they hope will come up with palatable solutions.

Gov. Arnold Schwarzenegger appointed such a commission early in his first term to deal with the state's burgeoning prison crisis, to little or no avail. The panel made sound recommendations, which the governor ignored, and the prison crisis has deepened.

Now the governor, together with legislative leaders, has created a new commission, this one to deal with another intractable state problem: the soaring cost of retiree pension and health benefits. Like the Corrections Independent Review Panel, the individuals named to the Public Employee Post Employment Benefits Commission have impressive credentials. They include academics, public employee union officials, financial experts and former pension fund managers.

But will panel members be able to persuade elected officials to force the kind of sacrifice from politically powerful constituencies -- specifically, public employee unions -- that fixing the state's retiree health and pension problems will inevitably demand? There's reason to be dubious.

The Legislative Analyst's Office laid out the health care part of the panel's challenge in a special report last year. Under new federal accounting rules, state and local governments are required to disclose their health care obligations to current and future retirees. The LAO study pegged the state portion of those costs at between $40 billion and $70 billion.

Those obligations are paid out of the general fund now, a $1 billion annual expense and mounting. To place the obligation on an actuarially sound footing, the LAO recommended that the Legislature and the governor begin setting aside billions more into an investment fund for future obligations. The LAO also recommended cutting benefits for future hires.

On the pension front, courts have consistently ruled that the state cannot borrow to finance its unfunded liability. So general fund contributions to the state pension fund are likely to rise sharply as well.

In his charge to the new panel, the governor correctly outlined what's at stake: "Rising pension and retiree health care costs," he predicted, "means less money for ... education, public safety, environmental protection and health care." That means a much diminished California.

The panel can guide lawmakers to the right answers. But the governor and legislators must do what they failed to do on the prison front -- make the hard decisions necessary to fix the problem. Doing that would be notable -- worthy, in fact, of the proverbial blue ribbon.

Twelve to study public pension costs
Panel selected by state lawmakers, governor to issue report by 2008

Keith Matheny
The Desert Sun
February 21, 2007

Twelve Californians have been appointed to lead a state group to examine and suggest solutions to the rising cost of public employees' post-retirement benefits.

State pension systems for government workers and teachers - CalPERS and CalSTRS - have a combined unfunded liability of $49 billion. And California may owe between $40 billion and $70 billion in promised but currently unfunded long-term retiree health care for state workers.

A four-day Desert Sun investigation in December revealed:

Coachella Valley cities' pension savings were wiped out in the dot-com stock market bubble that burst in 2000. The cities now face a collective unfunded liability of $51 million and rising. That's money that could go toward education, public safety, transportation and other public services.

Cathedral City's population increased almost 70 percent since 1990. Its emergency fire calls tripled in that time. The cost to run the city's 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 city officials see the cost of new hires' salaries and benefits as prohibitive.

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.

The valley's three school districts have a combined $114.5 million retiree health care liability.

Governments such as Palm Springs and Riverside County are turning to borrowing millions in bonds to pay off portions of their worker retirement obligations.

Gov. Arnold Schwarzenegger, a Republican, appointed six members to the new commission. Assembly Speaker Fabian Núñez and Senate President Pro Tempore Don Perata, both Democrats, appointed three members each.

The positions do not require Senate confirmation, and the commission members will not receive a salary.

The panel will determine the full extent of unfunded health care liabilities owed by California governments to their workers and propose plans to address those obligations and promised pensions. The commission is to draft a report for the governor and Legislature by Jan. 1.

Perata in a statement praised the "high quality of experts" convened in the commission.

"This group is clearly capable of undertaking the important and difficult task of weighing public employee benefits and finding ways to manage costs without undercutting workers," he said.

Nùñez said the Legislature would pay close attention to the commission's "process and progress over the coming year."

"We need a careful review of pension issues that is fair and responsible to workers and taxpayers alike," he said in a statement.

Researching retirement benefits
Gov. Arnold Schwarzenegger, a Republican, appointed six members to a new commission to study the rising costs of post-retirement benefits for public employees. Democratic Assembly Speaker Fabian Núñez and Senate President Pro Tempore Don Perata appointed three members each.

"Soaring obligations of this type remain one of the biggest problems facing governments everywhere, for the simple reason that rising pension and retiree healthcare costs mean less money for other government programs such as education, public safety, environmental protection and health care,"
Gov. Arnold Schwarzenegger said in a statement Monday.

Named chairman of the commission was Gerald Parsky, 64, of Rancho Santa Fe, chairman of the Aurora Capital Group, a Los Angeles-based investment firm.

Parsky, a Republican, served in the 1970s as an assistant secretary with the U.S. Treasury Department, and has served as a member of the University of California Board of Regents since his appointment in 1996.

In addition to Parsky, members appointed to the commission by Schwarzenegger were:

# Matthew Barger, 49, San Francisco, Republican, asset management advisor for an investment firm.

# Paul Cappitelli, 49, Rancho Cucamonga, Republican, a member of the San Bernardino County Sheriff's Department since 1978, currently serving as commander of the West Valley Detention Center.

# John Cogan, 59, Portola Valley, Republican, senior fellow at the Hoover Institution and a professor of public policy at Stanford University.

# Connie Conway, 56, Tulare, Republican, vice-chair of the Tulare County Board of Supervisors.

# Curt Pringle, 47, Republican, Mayor of the City of Anaheim and former Assembly Speaker.

# Appointed by the Legislature to the commission were:

# Ronald Cottingham, Bonsall, Republican. President of the Peace Officers Research Association of California and a lieutenant with the San Diego County Sheriff's Department.

# Theresa Ghilarducci, Democrat. A national expert on employee pensions, trustee on General Motors Retiree Health Fund and a past presidential appointee to the advisory board of the Pension Guaranty Corp. Director of the University of Notre Dame's Higgins Labor Center.

# Jim Hard, Democrat, president of California's largest union of public employees, Service Employees International Union Local 1000, representing nearly 90,000 workers.

# Leonard Lee Lipps, Democrat, public school teacher and regional manager for the California Teacher's Association.

# Dave Low, Sacramento, Democrat, assistant director of governmental relations for the California School Employees Association.

# Robert Walton, Willows, Independent, retired in 2005 after 34 years in state government, including more than 30 years with the California Public Employees Retirement System, or CalPERS.

The positions do not require Senate confirmation, and the commission members will not receive a salary.

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