Taxes and pension reform

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Our friends at CalBuzz, who are almost always right, have a point when they say that the right wing is going to use the lack of comprehensive pension reform against Jerry Brown's tax measure in the fall. That's unless the Legislature does something productive in August, which is always a challenge.

But whenever I hear this kind of analysis, I think about some of the political campaigns I've seen -- the tobacco tax is an excellent example -- and I wonder: Will it really make a difference?

No matter what the Leg does, Joel Fox and company are going to raise a ton of money and attack the tax plan -- and no matter what happens in August, they'll use public employees, and public employee pensions, as a flash point.

Brown could propose eliminating every dollar of pension spending tomorrow -- and he'd wind up in court, because a lot of this is mandated by contracts. But even if he could get away with it, the righties would still harp about pensions. Because even if we weren't paying modest pensions today, we used to -- and in these campaigns, the facts don't matter at all. See: Prop. 29. The truth is irrelevant when this much money is involved.

I guarantee the anti-tax groups will find some overpaid public employees and a couple of folks who spiked their pensions and they'll plaster it all over the airwaves. And the fact that Brown and the Democrats in Sacramento are working 23 hours a day to try to craft a reform plan won't matter a bit. Even if the reform plan passes, it won't be enough for these clowns -- and if they can outspend Brown's side by 5-1, well ... start holding bake sales for your local public school.

And by the way, who's going to put up a lot of the money for the Jerry Tax Plan? Public-sector unions.

My point is not that Brown and the Legislature should ignore pension reform (although, as Calbuzz also notes, public-employee pensions aren't the major cause of the state's fiscal problems). I know it's a huge political flashpoint, and the Righties have done an exceptional job at blaming union members for just about everything wrong with the state, and most people now believe that pensions are bankrupting us all and saddling our kids (who will work nonunion jobs with no pensions) with mountains of debt.

(Wait a second. Two wars? More than a trillion dollars wasted? The repeal of the CA vehicle license fee? Prop. 13? But never mind that; the debt's coming from pensions.)

The missed opportunity here, and the move I wish Brown had been willing to make, was to combine the two in the same package, to wit:

We're going to ask the public employees, who have already taken tens of millions in pay cuts and furloughs and suffered huge layoffs, to suffer even more and give up part of their pension package. And we're going to ask everyone who benefits from the Bush tax cuts and all of the corporations who benefit from loopholes in the state code to take a proportional haircut.

Proportional -- that is, if a union worker who gets a (typical) $30,000 a year pension has to pay 15 percent more of his or her paycheck a year into the pension fund, then a hedge-fund manager who makes $50 million a year has to pay 15 percent more of that paycheck to help fund for education and public services.

Everyone suffers, equally. Come on, Jerry -- put that on the ballot and make Joel Fox fight it.

Comments

Private sector workers don't get these sweetheart pension and health deals. Not even close. So why should they vote for higher taxes when we all know that they will not go into additional services or saving services, but rather will make it easier for municipalities to dodge the bullet on the real reforms that have to happen? And kick the can into the long grass?

I might even vote for more services for those who need it. I'll never vote to subsidize a worker with a better pension plan than I have simply because he works for the city. Tim, tell me why I should pay both for my pension AND for others too?

Fix that first and then, and only then, we'll talk about tax hikes. Otherwise it is over my dead body.

Posted by Guest on Jun. 25, 2012 @ 4:11 pm

Tim, I have been arguing the tax thing with you forever. I agree that taxes are too low. I agree that all of us are paying too low taxes and that this is one reason oure schools are crumbling, for example...but

DEFINED-BENEFIT pension plans are also dragging us down.

CALPERS retirees get a guaranteed 7.5% raise in their pensions each year. Your beloved "city family" has guaranteed 8% returns (just lowered from 8.5%).

These pension plans were devised in the 1990s, when the stock market was in its 1980-2000 bull run. 8.0% returns seemed like they would last forever.

The stock market rose 0% in 2000-2010. But the pension costs kept rising and rising.

And now city and state workers are dipping into the general fund more and more each year. We have to cut government services - for the poor, for kids, state parks, etc. - to feed the pension monster.

It is all unsustainable.

Posted by troll the XIV on Jun. 25, 2012 @ 5:38 pm

I'm all for pension reform, combined with revenue reform that shares the pain proportionately.

You want to get rid of defined benefits? Fine -- get rid of the defined tax-break for big commercial property owners that is Prop. 13.

You have to understand that public-sector pensions are an issue, yes -- but only one of the numerous factors that have caused the collapse in the public sector and key services over the past few years. Schwarzengger's unilateral decison to abolish the vehicle license fee has cost the state almost $50 billion over the past eight years. Compare that to pension costs. Both are a big deal. Only one is on the table.

You get the point.

Posted by tim on Jun. 25, 2012 @ 8:09 pm

I do get the point. The vehicle license fee should never have been cut. Prop 13 loopholes give unfair tax advantages to commercial property owners. Both of the tax measures on the ballot this fall should be passed.

But...

"We're going to ask the public employees, who have already taken tens of millions in pay cuts and furloughs and suffered huge layoffs, to suffer even more and give up part of their pension package."

I have to disagree with this. First, public employees have fared better than most of the rest of us during the Great Recession. Most did not get pay cuts. They have had very few layoffs. Your beloved "city family" got its healthcare costs raised from $9 to $45 a month and whined about that. They are out of touch with reality. The stock market crashed in 2008, but their pensions kept rising. The stock market nipped higher in 2010, and the "city family" got an automatic kick-in pension INCREASE even though their pension pots were - and still are - hughely underfunded. The whole system is rigged in their favor.

I am an professional artist. In an average year, I make maybe $60,000 a year. I'm paying $1,300 a montj in health insurance for myself and two teenagers. I got a letter from Social Security in April: if I retire at age 66, I'll get $1,700 a month in pension. I know two retired cops (both retired at 60) who get pensions close to $100,000 a year. Many city workers can retire under 60 (after getting spike-promotions) and get much better pensions and benefits than I ever will.

And I wouldn't care, I really wouldn't. Not at all. Expect for the fact that everything gets cut each year - summer school, street cleaning, services at SF General, etc. - because the swelling public -worker pension pot needs to be fed.

I think I'm a pretty typical liberal. I will support private-sector unions until the day I die. But public-sector unions and workers are living in a fantasy world. They don't have to worry about bankruptcy (not yet anyway) or falling through the cracks like the rest of us.

Foremost, they need to be shifted to DEFINED-CONTRIBUTION pension plans. You know: you get out what you pay in. You don't have to rob the poor or the taxpayers.

Posted by troll the XIV on Jun. 25, 2012 @ 10:19 pm

We never should have let the rich take away our pensions, public or private. Why should the Wall Street types retire with millions while the rest of us eat cat food?

Posted by GlenParkDaddy on Jun. 25, 2012 @ 11:54 pm

Too bad it's compeltely untrue. It's the public sector workers who are bleeding us dry. The rich, by and large, create wealth and jobs, while the public sector consumes it.

Posted by Guest on Jun. 26, 2012 @ 6:11 am

I agree with this from the Calbuzz article: "Let’s be blunt. Democrats, whose political livelihoods have steadily and increasingly become dependent on union money since Jerry Brown in his first term signed the legislation that gave state employees collective bargaining rights, are terrified of moving an inch on pensions without permission and marching orders from the labor groups that finance their campaigns."

That statement highlights a fundamental problem. Many taxpayers now view legislators as representing the public unions, not the state citizenry as a whole.

Posted by The Commish on Jun. 26, 2012 @ 8:05 am

Labor abandoned working Californians and now working Californians are returning the favor.

Labor was warned, but they took care of themselves first and only and offered zero, no, zip solidarity to the unorganized.

Have any professional staffers at organized labor been held accountable for their mismanagement of the labor movement, or do they keep on collecting paychecks even though the positions of their members and of unorganized working Californians who labor claims to speak for are deteriorating?

Posted by marcos on Jun. 26, 2012 @ 8:30 am

Commish, point well taken.

Though today's paper reports that California state unions have just agreed to a 5% pay cut. Good news. As a result, I will be voting "yes" on Uncle Jerry's tax increase proposition in November.

SALINAS FILIING FOR BANKRUPTCY. That was the other headline in the Chron today.

Do you think the San Francisco "City Family" public workforce is taking note of this? I hope so. But probably not. Mayor Lee and many other pols here worked many years for the "city family". When they negotiate with the unions on pensions and pay packages, they are basically negotiating with their long-time friends. They will never be tough.

We need to look into taking the same measures that San Diego and San Jose took in order to deal with the pension problem.

Posted by troll the XIV on Jun. 26, 2012 @ 8:37 am

I think when Oakland goes south, which it easily may, then we're going to see a tsunami of cities ducking their obligations and slashing jobs.

Could be a good thing, if it gets the bedgets down to something sane.

A 5% pay cut today is good, but it may not be enough, and I'm still not voting for Brown's tax measure. We need to starve the beast to tame it.

Posted by Guest on Jun. 26, 2012 @ 11:27 am

Reread the Chron- the unions, ahem I mean the Dems are just trying to dupe citizens into approving an absurd tax increase.

They are actually getting a 3% RAISE in the fiscal year and having their work hours reduced TEMPORARILY for one year while taxpayers are being asked to pay a tax increase for SEVEN years. (Standard union trick - SF unions do the same bait and switch.)

They are also getting the same pension benefit for fewer hours worked, which means you guessed it - the taxpayers will have to make up for the lower pension ontribution from the workers in the year. This is INCREASED compensation to the worker- genius! Jerry and the Dems invented reverse pension reform.

Posted by Guest on Jun. 26, 2012 @ 12:40 pm

a lot of issues here: iraq wars, tax strucuture and pension reform.

I certainly want hedge fund managers to pay more, but your logic fails, as usual when you compare asking public sector workers to contribute more towards their retirement and higher tax rates on the wealthy; those are independent events. Why should public sector workers be any different than me? I max out on my IRA contributions.

Many voters perceive a singular unfairness with generous pension benefits for public sector workers, for which we are paying, when we are struggling to make ends meet.

Higher taxes and increased spending are not the automatic answers; you have to be willing to address the bloated bureaucracies of the state government.

Where is the data that shows that California has suffered massive public sector layoffs?

Posted by Guest on Jun. 26, 2012 @ 11:36 am

Maybe a few here and a few there, but to fix the deficit we need wholesale layoffs en masse. If the unions won't cut their pay and benefits, then we must cut their ranks, and outsource as much as possible, until they no longer have the power to hold us tor ansom like this.

I'm mad as hell and will not vote for any ta hike until their pensions are in line.

Posted by Guest on Jun. 26, 2012 @ 1:38 pm

So, no 5% pay cuts at all for state employees.

Reading the fine print yesterday, I see they are getting a 3% raise this year, and getting more furlough days on top of that.

That's not a pay cut at all.

Typical of the bait-and-switch tactics used by the SEIU.

Posted by Troll the XIV on Jun. 27, 2012 @ 6:00 am

actually some progess being made here on the deficit, but if you're right, then it's just smoke and mirrrors.

Why the hell are you giving a raise to these parasites?

Posted by Guest on Jun. 27, 2012 @ 7:18 am