The evidence that the nation’s mushrooming public pension crisis stems from a toxic mix of political malfeasance and misdirection continues to mount.
A Los Angeles Times piece last week explained how former California Gov. Gray Davis signed legislation in 1999 to provide state workers with “the kind of retirement security normally reserved for the wealthy.” The measure sweetened the state’s already generous pension program, allowing some workers to retire at age 50 with a monthly check for life of up to 90 percent of peak salary.
Democrats in Sacramento dismissed concerns about costs. The state pension fund would grow fast enough to cover the increased expenses, proponents promised. “They were off — by billions of dollars — and taxpayers will bear the consequences for years to come,” the Times reported.
California spends $5.4 billion a year on public pensions — 30 times its retirement expenses in 2000, the Times found. Gov. Davis, now an attorney in private practice, told the paper that he wouldn’t have put his signature on the bill had he known the consequences.
Of course, that’s little solace to the private-sector workers forced to fund this swag bag. That government unions continue to whitewash concerns over soaring pension costs while showering millions of dollars on Democrat lawmakers who keep the spigot of taxpayer cash flowing to their financial benefactors only compounds this travesty.
And it gets worse.
The New York Times reported last week that most public pension funds keep two sets of books to disguise the true costs. There are “the officially stated numbers and another set that reflects the ‘market value’ of the pensions.”
In essence, the “market-valuation approach considers both the risk and the return of a pension’s investments,” writes Andrew Biggs of the American Enterprise Institute. Meanwhile, conventional government accounting “ignores risk entirely.” The difference is vast. “The market value of a pension,” The New York Times explained, “reflects the full cost today of providing a steady, guaranteed income for life — and it’s large. Alarmingly large, in fact.”
For instance, using the market-value calculation, Nevada’s unfunded liability soars to $48.5 billion — more than four times the $11.2 billion that is usually reported.
Lavish retirement promises have already forced a handful of municipalities across the country into bankruptcy. A few states — Illinois, in particular — teeter on the brink.
But despite the glaring need for action, too many Democrats still elevate the comfort of special interests above fiscal common sense and the taxpayer. In Carson City, for instance, those left of the aisle have repeatedly nixed efforts to transition the state retirement system to a more manageable defined contribution plan.
Ironically, such willful inaction threatens the very people they claim to be protecting. What happens, after all — and it will happen, absent reform — when there’s not enough money to cover all the promises?