During a speech Monday to union organizers at a Sacramento dinner, California Gov. Jerry Brown made one of his characteristic off-the-cuff jokes. “If (Donald) Trump were ever elected, we’d have to build a wall around California to defend ourselves from the rest of the country,” he said, adding that Californians prefer bridges to walls.
Conservatives said they’d like a chance to get out of here first. There’s no need to worry, though. Whether it’s bridges or walls, the way California builds infrastructure these days, it would take decades to finish and the shoddy work would pose no barrier to egress. The new eastern span of the Bay Bridge finally opened 24 years after the Loma Prieta earthquake, amid reports of faulty welds and going a mere 2,500 percent over budget.
Brown’s quip was a reminder of how far California diverges from the nation. For instance, Brown recently signed a motor-voter law that will make it easier for immigrants living in the country illegally (who nonetheless can legally have a driver’s license) to vote, which is just the latest effort by Democratic leaders to erase distinctions between legal and illegal immigration. Yet voters shrug. Since the 2003 recall that gave us Gov. Arnold Schwarzenegger, the public has shown no appetite for rebellion.
But while Brown’s wall remarks gained headlines, his other remarks at the dinner were more revealing. “Some of these old white guys ought to recognize that the whole pension system would collapse if we didn’t have a bunch of young people coming into this country and into this state,” he said, according to a Sacramento Bee report.
Reformers have for years been trying to force Brown to deal with an actual wall that has been built around California over the past few decades — the wall of debt. Unfunded pension and retiree health-care liabilities in particular make a mockery of the notion that California is operating with a “surplus.” The latest estimates put those unfunded liabilities at more than $220 billion. Those already onerous liabilities will soar higher still if the stock market doesn’t meet the pension funds’ rosy predictions.
It’s nice that Brown has pension issues on his mind. Someone should. Legislative leaders have no interest in wrestling with those numbers. They are too eager to spend the imaginary surplus. Brown, however, has mostly been talk on the matter.
Earlier in his administration, Brown proposed a surprisingly solid reform plan that largely echoed Republican concerns. But he used no political capital to advance it, and ultimately signed the modest Public Employees’ Pension Reform Act. It passed during the state’s budget crisis, mainly as a way to convince voters the state is so serious about reform they could go ahead and trust it with higher sales- and income-tax rates.
A rebounding economy covered up the obvious general-fund problems, and concerns about unfunded liabilities — despite their role in driving three cities into bankruptcy — were brushed aside. Now we finally hear the governor’s actual plan: Rely on lots of younger workers, mainly immigrants, to pay into the state’s pension funds.
Nationally, new workers certainly are needed to pay for the Social Security Ponzi scheme. California’s government-employee pension funds are defined-benefit deals. Employees are promised a set amount of pay for themselves and their spouses, until death do they part, based on a set formula that courts have ruled can never be reduced.
And those formulas have gotten exceedingly generous. For instance, the “public safety” (police, firefighters, billboard inspectors and an ever-expanding class of workers) deal is typically “3 percent at 50,” which means employees can retire with 3 percent of their final years’ pay, multiplied by the number of years worked. That means 90 percent of final pay at age 50, before all those spiking and iffy disability schemes drive it higher. Hence, we see endless scandals with California government employees retiring with $200,000-plus pensions.
These deals are, quite frankly, unsustainable, as I detailed two years ago for the Spectator. But we’d be wrong to suggest the state’s leaders aren’t concerned about pension “sustainability,” although not of the type usually associated with pension funds. California officials want the California Public Employees’ Retirement System to use its immense financial clout to promote climate sustainability. This week, the CalPERS investment committee voted to suggest that climate-change expertise should be a factor when corporations CalPERS invests in choose new board members.
There’s nothing wrong with investors wrestling with those risks. But realistically, the price of all investments is already reflected in whatever risks investors anticipate from climate change — or, more likely, because of expected regulations related to it. This is just another opportunity for CalPERS to do what it loves to do: use its financial leverage to strong-arm private companies into adopting policies that advance its political agenda. Meanwhile, CalPERS insists there is no unfunded-liability crisis, even as its rate increases drive more cities into “service insolvency” (too little cash to pay for an adequate level of municipal service).
Brown probably is right that young workers and new immigrants boost the economy and help pay for the overburdened pension systems. But his point would be better taken if he — and other state officials — took a serious run at reforming the state’s ridiculously generous pension and health-care systems. It’s hard to joke about that wall.