CalPERS, unions deceiving public about pensions

Last month, I wrote that Gov. Jerry Brown's 2012 attempt at pension reform has failed.

The California Public Employees Retirement System, the nation's largest pension system, immediately responded on its website, declaring that “Pension Reform Has Made a Difference” and claiming that my column “greatly oversimplifies and needlessly discounts the real impact” of Brown's plan.

Californians for Retirement Security, the unions' pension propaganda arm, led by labor leader Dave Low and political consultant Steve Maviglio, followed with a commentary proclaiming that “these reforms are producing savings now, and will continue to do so for decades.”

Come on, folks. Let's get real.

Sure, Brown's pension changes have produced small savings. But they're dwarfed by the soaring costs. It's time to stop deceiving the public. It's time to stop cherry-picking data and provide the complete picture.

Things have gotten much worse since the changes were implemented. Total pension debt at California's three statewide retirement systems has increased about 36 percent.

Add in local pension systems and the total shortfall across California has reached at least $374 billion - about $29,000 per household. The necessary payments over the next three decades to cover the shortfall will strangle many local government budgets.

Taxpayers should be deeply concerned. So should public employees.

In coming years, local governments will be forced to drastically cut services and eliminate union jobs to pay the debt. Some public agencies will try to head that off by asking for tax increases. And some will simply go broke, file for bankruptcy and endanger the pensions employees and retirees worked so hard to earn.

Across California, we're already starting to see this happening. It's will get worse as payments on pension debt increase, as they must to shore up the system.

Yet labor unions issue vacuous denials. CalPERS lambastes critics who dare question the soundness of the system and downplays the seriousness of the situation - even though its own in-house financial experts and outside consultants warn of danger ahead.

And local government leaders act surprised that they face steeply increasing pension rates for which they didn't plan. Either they're fiscally incompetent for not seeing this coming or they're disingenuous for feigning surprise.

Labor leaders. CalPERS. Local officials. They have all failed to responsibly serve their respective constituents.

Ironically, Brown seems to understand the gravity. While his 2012 pension changes merely nibbled on the edges of the crisis, he has since pushed for more needed changes at CalPERS.

Earlier this month, he told a Bloomberg reporter that CalPERS will probably lower its investment forecasts again, which would mean more painful, but necessary, rate increases for state and local governments.

Unfortunately, he has not pushed hard enough, and he has been unwilling to use political capital to force the issue.

Meanwhile, CalPERS' spin misses the forest for the trees. Take, for example, its absurd reaction to my column last month.

They say I discount the “real impact” of Brown's pension changes: “Cost savings for the state range from 1.2 percent of payroll for miscellaneous plans … up to 5.1 percent of payroll for safety plans.”

Percent of payroll is a key measurement of the annual contributions CalPERS requires to fund the system. In this case, those numbers lack context.

Nearly three weeks later, a CalPERS' spokesman acknowledged that the savings apply only to the roughly 30 percent of the workforce hired since the pension changes went into effect.

So, the largest claimed savings, 5.1 percent of payroll for state public safety workers, is only roughly 1.5 percent of payroll when applied to all those workers.

Now the big picture: During that same time, the overall state employer contribution rate for public safety workers has increased from 34 percent of payroll in 2013 to 49 percent this fiscal year.

What CalPERS' claim means is that, without the pension law changes, the current 49 percent rate would have been about 50 percent instead.

But it's still about 15 points higher than it was in 2013, when the changes were launched. Worse, that rate will likely hit or surpass 60 percent in the next five years. That means that, for every dollar of salary, the state will give CalPERS another 60 cents.

The only way to meaningfully reform pensions is to address prospectively the unaffordable benefit levels for all employees. Brown failed to do that.

Daniel Borenstin is a columnist for the East Bay Times.