Gray Davis joins call for pension reform

The call for pension reform received an unexpected boost from an unlikely source this week — former Gov. Gray Davis. In an interview with Reuters, Davis said reforms advocated by Gov. Arnold Schwarzenegger will make it easier for whomever holds the job next, and he praised Schwarzenegger for pushing for changes in the state pension system — changes that Davis said were now inevitable.

“With … the open primary and redistricting reform, at least 20% of the Legislature will have its interests properly aligned, and they will be punished [by voters] if they don’t solve big problems,” he said. “Right now, the Legislature is punished if they do solve big problems. But help is on the way for the next governor.”

Of course, Davis is the one who is often blamed for boosting state worker pay and increasing pension benefits. The Schwarzenegger administration, led by David Crane, points to a measure signed by Davis in 1999 – SB 400 – is blamed for part of the current mess.

That measure, passed at the end of the 1999 legislative year in headier financial times, passed out of the state Senate 39-0. It passed 70-7 out of the state Assembly.

Schwarzenegger now wants to roll back pensions for new state hires to pre-SB 400 levels. Schwarzenegger has said he won’t sign a new state budget without pension reform.
The CalPERS board was among those pushing for the pension changes in 1999. An over-performing stock market led the firm to make rosy assumptions about the pension fund’s future performance. In short, they counted on a continuing boom, and said the state could reduce general fund payments to the pension fund, even while increasing benefits for workers. The annual state payment to PERS, which was about $1.2 billion in 1997-98, was cut to about $766 million in fiscal 1998-99.

A CalPERS brochure from 1999 predicted, “CalPERS fully expects the state’s contribution to remain below the 1998-99 fiscal year for at least the next decade.”

But that didn’t quite work out.

Davis said the financial assumptions that led to him signing massive increases in state worker pensions were wrong and should be undone.

“The evidence seemed to suggest the state was wealthy enough to afford it,” he said. “It was part ideology and part math, and the point is the math was wrong, big-time.

“Pension reform is essential. You just can’t afford the benefits that have been promised because all the actuarial studies turned out to be wildly optimistic,” he said. “We have no choice now, and if I was governor, I would be doing exactly what Arnold is trying to do, which is require people to contribute more to their pensions.”

Democrats have called for Schwarzenegger to negotiate any changes to state pensions through the collective bargaining process. Six bargaining units have already reached contract deals with the administration. Some of the state’s largest unions, including SEIU Local 1000 and the California Correctional Peace Officers Association, have yet to reach new budget deals.