Editorial: Tax-funded pensions need reality adjustment
After voter rebukes in Wisconsin, San Diego and San Jose, the uneasiness of public-sector employees is spreading. The security of paychecks and benefits has been breached. Pensions could be frozen or otherwise transformed to align with new economic realities.
It’s “been there, done that” for most private-sector workers over the past 30 years. Their counterparts in government are just now going through this. If recent election results are any indication, more nerve-jangling changes are on the way.
It has to be this way. Government revenue and pension investments haven’t kept pace with promises that were made in more economically stable times. Plus, the plight of taxpayers who finance public pensions has gotten worse.
While the Wisconsin vote made the larger headlines, the more telling results for public employees occurred in two large cities in the liberal state of California. Voters in San Diego and San Jose sent resounding messages: If the choice is between the generous financing of public-sector retirement funds or restoring government services, they want the latter. Voters in those two cities even went after the pensions of current workers, which is a move that will surely be challenged in court. Both cities’ initiatives call for current and future employees to contribute more to their retirement.
While public employees decry the unfairness of “broken promises,” many private-sector workers marvel that these traditional pension plans still exist. Most companies moved to 401(k)-style plans long ago.
Pension reform cannot be labeled a partisan issue. San Jose’s Democratic mayor supported that city’s initiative, which grabbed 70 percent of the vote. Two-thirds of San Diego’s voters agreed with its initiative. Rahm Emanuel, Chicago’s mayor and former chief of staff for President Barack Obama, wants to end automatic cost-of-living raises for that city’s retirees. Forty-three states have recently adopted public-sector pension reforms.
Democratic Gov. Chris Gregoire has called for pension reform in Washington state, and the Legislature recently rolled back a generous provision for early retirees. This is just the beginning.
Circumstances that led up to the California votes sound familiar. San Jose was unable to finance the operation of four new libraries, so they haven’t been opened. San Diego was forced to set up a rotation for firehouse closures. Both cities laid off many workers, causing services to diminish. Meanwhile, firefighters and police officers in San Jose could retire after 30 years and collect pensions amounting to 90 percent of their salaries.
Public employees’ traditional pension plans have survived this long because the “employers” at the negotiating table weren’t dealing with their own money. In fact, these leaders often count on the political support of the unions for their own survival.
What the votes in California show is that when the employees’ real bosses (the taxpayers) speak, the bargaining becomes a lot tougher. Dwindling services or unrealistic pensions? It isn’t a close call when you’re paying the bill.