Claims that pensions are bankrupting state government because of poorly run and expensive pension plans, and that we are headed for Armageddon, are just plain wrong. Seizing on the financial collapse of 2008, and at times just flat out inventing statistics when the real numbers do not produce headline-grabbing dire results, has become stock in trade for those committed to destroying public pensions.
The state of California is in fact paying a lower percentage of payrolls for pensions today than it did in 1980. Desperate to hide this reality, pension opponents are fond of using the low point of state contributions in the late ’90s when the state was using investment gains to substitute for contributions, to generate misleading graphs forecasting a dramatic spike in payments.
Similarly, claims that the unfunded liabilities are even larger than reported are based on non-credible studies that deliberately lower future investment returns of pension funds, or use older valuations instead of current valuations. While the hole has not been filled, strong investment returns since 2009 for public pension plans have dramatically cut into the unfunded liabilities.
At the same time, there have been changes to public pension plans to address costs. Public employees have been willing participants in helping fix California’s budget woes. The LAPPL, like many organizations, unequivocally supports fair efforts to clamp down on fraud and abuse.
Overall, California public employees’ contributions to their pensions have climbed from 5 percent to 7 percent to up to 11 percent. Formulas for calculating pensions have been reduced, and stringent new rules are being established to eliminate abuses like spiking. In addition, public employees have felt the pain of the economic downturn, with paychecks slashed by furloughs, docked pay and layoff notices.
Out-of-state billionaires and extremists are driving this assault on California’s middle class, driven by blind ideology or the prospect of the tremendous fees they can generate if public employees are forced in to 401k plans. The past year has shown that thoughtful and meaningful decisions concerning retirement security for California’s public employees can and should be made at the bargaining table. What is certain is the answer is not allowing out-of-state billionaires to swoop in and change California’s constitution so public workers can be forced into risky 401(k) retirement plans similar to those that have left private sector workers fearing for their families’ futures.