April Boling, the former chairwoman of the Pension Reform Committee, just passed along some unfortunate news.
California Attorney General Bill Lockyer released an opinion at the beginning of the month that is not welcome news to people like me who believe that the government should not make future taxpayers pay for the benefits they give current public employees.
Here’s what Lockyer determined:
The Board of Administration of the California Public Employees Retirement System may extend the payment schedule for retroactive benefits beyond the average remaining work period of the employees eligible to receive the benefits without violating the board’s constitutional duties to provide secure benefits to its members, minimize costs to employers, assure the competency of the assets of the retirement system, and protect the employees’ contractual rights to an actuarially sound retirement system.
Remember, the worst part of what governments like the city of San Diego and county of San Diego do when they enhance the pension benefits of their employees is that they give the benefit retroactively. This means that rather than give employees a boost from a certain point forward, they make the boost apply to the employees’ entire service.
This is completely stupid because the point of having a pension is to retain and recruit quality employees. Awarding pension benefits retroactively is just a giveaway. When the county of San Diego did it, in 2002, it didn’t retain and recruit quality employees. They retired in droves.
What’s more, giving benefits like this costs a bundle.
What the attorney general just decided was that governments didn’t have to pay for this kind of thing within the likely time period during which the people who benefit from it will retire. In other words, they can do this big giveaway, but not actually pay for it for decades – leaving our kids with the bill for their decision to give employees a huge bonus now.
Lockyer hides behind the notion that the trustees who oversee these pension funds are independent and able to do whatever they want to make the local governments pay for the benefits they grant.
But this is a stupid notion as well. The majority of trustees on these pension boards are employees or representatives of employee interests. It’s in their interest to get these benefit enhancements and to not make the government pay for them. If a government has to make big payments to its pension system, it might choose to lay employees off in order to do it. That leaves them hopelessly conflicted.
Lockyer did not help this situation at all.
If you want to protect the independence of the boards overseeing retirement systems, a check should be in place. The constitution, ideally, would not allow employees or conflicted members of the pension system to serve on the boards that decide how much their benefits should cost the employer.