Despite facing a $50 billion future debt for unfunded public employee pensions, California still resists reforms that some other states have adopted. Continued delay potentially adds to the obligation of taxpayers, who are responsible to make good on the retirement promises government makes.And perhaps by constitutional law, such as here in MI, the taxpayers are on the hook no matter what:
Politically powerful California government unions are the reason reforms haven't been implemented. But in 17 other states, benefits have been lowered for new hires, retirement ages extended and employee contributions increased.
California taxpayers are legally responsible to pay what's owed if too little is set aside or earned in investments to cover these expenses. Recent pension fund investment losses aggravated California's problem, now estimated to be $50-billion more than the state has set aside.Gubernatorial candidate Jerry Brown had a few words regarding the pension systems, and his answer was in a word bad: (click to play)
Nationwide, a $1 trillion gap exists between what's funded and what's promised by governments at all levels, the Pew Center on the States estimates. In the past two years, the expanding shortfall has prompted 10 states to increase retirement contributions by employees and 10 states to lower new employees' benefits, or increase their retirement age and required years of service.
But the vast majority of California local and state governments haven't acted. Moreover, a ballot initiative to roll back benefits for new hires died for lack of financial backing to qualify it for the November ballot. Although Gov. Arnold Schwarzenegger in January proposed state workers increase their contributions by 5 percent, he's left it to a reluctant, union-shy Legislature to make the reform happen.
In a recent Register op-ed column, GOP candidate for governor Meg Whitman said new state workers should have retirement plans with fixed employer contributions, like 401(k) accounts in the private sector, rather than the existing defined-benefit plans. She also called for retirement age to be increased from 55 to 65 for most current state workers, with longer vesting periods and increased contributions.
Replacing fixed-benefit systems would reduce taxpayers' exposure if pension-fund investments tank, and requiring employees to contribute more to their own retirements could reduce taxpayers' upfront costs, as well. But so far, unions remain opposed to their members paying more or losing guaranteed benefits. We're interested to see how Ms. Whitman would implement her reforms, but leaving it to the Legislature as Mr. Schwarzenegger has probably dooms the effort.
Ugh. He thinks having a 401 (k) is the same as giving money to Wall Street, yet the CA pension fund has itself sustained losses because bureaucrats - egads! - put the money on the market all the same! It's just a matter of who controls the money - you or the bureaucrats. Relatedly, there was also this from Michael Barone via Instapundit: Low-tax Texas Beats Big-government California.
No one would include Perry on a list of serious presidential candidates, including himself, even in the flush of victory. But in his 10 years as governor, the longest in the state's history, Texas has been teaching some lessons to which the rest of the nation should pay heed.Michigan also has a full-time legislature. Can you imagine lawmakers meeting only 90 days every 2 years? It's like a dream. And the results - well - speak for themselves, no?
They are lessons that are particularly vivid when you contrast Texas, the nation's second most populous state, with the most populous, California. Both were once Mexican territory, secured for the United States in the 1840s. Both have grown prodigiously over the past half-century. Both have populations that today are about one-third Hispanic.
But they differ vividly in public policy and in their economic progress -- or lack of it -- over the last decade. California has gone in for big government in a big way. Democrats hold big margins in the legislature largely because affluent voters in Los Angeles and the San Francisco Bay area favor their liberal positions on cultural issues.
Those Democratic majorities have obediently done the bidding of public employee unions to the point that state government faces huge budget deficits. Gov. Arnold Schwarzenegger's attempt to reduce the power of the Democratic-union combine with referenda was defeated in 2005 when public employee unions poured $100 million -- all originally extracted from taxpayers -- into effective TV ads.
Californians have responded by leaving the state. From 2000 to 2009, the Census Bureau estimates, there has been a domestic outflow of 1,509,000 people from California -- almost as many as the number of immigrants coming in. Population growth has not been above the national average and, for the first time in history, it appears that California will gain no House seats or electoral votes from the reapportionment following the 2010 census.
Texas is a different story. Texas has low taxes -- and no state income taxes -- and a much smaller government. Its legislature meets for only 90 days every two years, compared with California's year-round legislature. Its fiscal condition is sound. Public employee unions are weak or nonexistent.
But Texas seems to be delivering superior services. Its teachers are paid less than California's. But its test scores -- and with a demographically similar school population -- are higher. California's once fabled freeways are crumbling and crowded. Texas has built gleaming new highways in metro Houston and Dallas-Fort Worth.
In the meantime, Texas' economy has been booming. Unemployment rates have been below the national average for more than a decade, as companies small and large generate new jobs.
And Americans have been voting for Texas with their feet. From 2000 to 2009, some 848,000 people moved from other parts of the United States to Texas, about the same number as moved in from abroad. That inflow has continued in 2008-09, in which 143,000 Americans moved into Texas, more than double the number in any other state, at the same time as 98,000 were moving out of California. Texas is on the way to gain four additional House seats and electoral votes in the 2010 reapportionment.















