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EDITORIAL: Los Angeles drowning in retiree pension, health costs

The Democratic takeover of the state Legislature last November was bad news for reform on multiple fronts, particularly when it comes to public pensions. But while few lawmakers want to talk about it — and fewer still have the guts to act — the fact remains that more and more jurisdictions are drowning in rising pension obligations to public employees.

Democrats in Carson City who remain beholden to government unions may want to glance over at California.

As the Los Angeles Times reported last week, Los Angeles is on the hook for more than $1.1 billion in employee pensions and health care. That amounts to nearly 20 percent of the city’s general fund. In 2002, it was less than 5 percent.

So, how did this happen?

As the beginning of the past decade, the Times found, the city’s political leaders promised public sector workers early and healthy retirements, and that the stock market — not taxpayers — would foot the bill. As the paper points out, however, the city’s planned investment gains didn’t pan out, leaving private-sector workers, many of whom are struggling to fund their own retirements, to cover the guaranteed payouts.

Civilian employees in most of California, including Los Angeles, can retire at 55 and receive more than half of their salary for life. Police officers and firefighters can retire at 50 and get up to 90 percent of their highest salary guaranteed. Without major reform, the people of Los Angeles will be stuck with the annual billion-dollar pension bill — a bill that’s gone up by $18 million since just last year.

Nevada’s pension obligations are pretty stifling, as well. As we’ve noted again and again, the Nevada Policy Research Institute, a free-market think tank in Las Vegas, says more than 1,600 retired state public employees collect at least a $100,000 in pension benefits every year for life. Nevada and taxpayers and public employees poured almost $1.5 billion to the system in 2013, which was good for 12 percent of all state and local tax revenue combined that year, the second highest rate in the nation.

Also, as the Institute’s Robert Fellner pointed out, roughly $600 million of those funds went straight toward paying down the retirement system’s debt, which, like California’s, has soared as it failed to hit its overly optimistic investment goals. As Mr. Fellner points out, that money “provides no benefit whatsoever to the current worker, taxpayer or employer paying the ‘pension tax.’”

While state lawmakers, typically Republicans, have presented multiple proposals to reform the system, all of them — aside from minor tweaks — have fallen on deaf ears in Carson City thanks to Democratic indifference. If Nevada keeps following its neighbor to the west down this road to insolvency, it won’t be difficult to finger the culprits.

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