Pension Debate: Comparing Apples to Onions

apples-onions-2In their never ending drive to distort reality in support of their attacks on public employees and public employee pensions, the Orange County Register has again used misleading comparisons to gin-up fear and envy with their Sunday editorial Bailing out state pensions. The premise for their attack is their endorsement of a legislative resolution, introduced by four Republican Assembly members, including Orange County Assemblyman Don Wagner. The resolution proposed that the State Legislature go on record as opposing any federal bailout of failed public employee pension plans. The resolution seems straight forward enough and since it is non-binding, the Register editorial proposes that “it makes a great deal of sense,” and “should garner widespread bipartisan support.”

Of course, the author fails to point out that there is little likelihood that such a bailout would have the possibility of passage in Congress. But as the Register’s editorial writers plow through the rationale for their position, the true reason for this resolution, and the Register’s support, is revealed. And you only need to reach the last sentence of the second paragraph of their editorial to get there.

“Illinois faces similar pension problems to California’s, given the power of the public-employee unions in that state.”

By equating California’s pension systems to those of Illinois, and inferring the causes of their dissimilar funding challenges to labor unions, this accomplishes two of their core goals. Promoting fear and assigning blame for that fear to labor unions.

stabilityHere’s the problem; the relative stability of California state public employee pension plans to the instability of Illinois pension plans is like comparing apples to onions. As of June 2011, CalPERS, California’s largest public pension plan, was funded about 74%. Illinois SRS was funded at 50.9%. It is unreasonable to compare the CalPERS system to Illinois SRS at. In addition to the difference in plan funding ratio, size, and composition, there is the fact that one of the major factors in the stress on Illinois state pension plans was the failure of the Illinois state legislature to make contributions at the required level to the SRS plan. That has not occurred at a comparable level in California, and recently passed legislation prevents such mistakes in the future.

econ-bounceThis is not to suggest that there will only clear skies moving forward. For full recovery, we need a strong economic rebound and along the way there will likely be bumps in our path. We can cower in the corner waiting for the next calamity as the Register editorial writers suggest, or we can recognize that the changes implemented with last year’s pension reform legislation are more likely than not to light a path forward to greater stability for our pension system.

So now that we have established that the comparison between California and Illinois is baseless and irrational, let’s clear up the myth of union control of politicians. This is another ginned-up assertion that is not based in fact. While California labor groups have been successful advocates for their members, and the vast majority of middle class workers, their combined resources are dwarfed by those of other interests intent on the destruction of the middle class in America. The ugly mess of politics is governed by money and influence.

unionsUnions are not the evil behemoths the Register editorial writers portray. They are merely advocates for middle class public employees whose individual voices are small. Unions do not seek to bankrupt their employers, or become puppet-masters to politicians. They simply want a seat at the table so they can advocate for fair wages and sustainable, livable, retirement security.

Finally, it seems irrational that a hyper-Libertarian editorial staff, that advocates daily for limited and non-meddling government, would support the waste of time and effort devoted to a non-binding legislative resolution. From a limited government perspective, such things would be as pointless as equating apples and onions.

  1 comment for “Pension Debate: Comparing Apples to Onions

  1. Robert Lauten
    May 8, 2013 at 2:17 pm

    “CalPERS Reports Preliminary 2011-12 Fiscal Year Performance of 1 Percent”
    “CalPERS 1 percent return is below the fund’s discount rate of 7.5 percent ….,”
    http://www.calpers.ca.gov/index.jsp?bc=/about/press/pr-2012/july/preliminary-returns.xml

    The “7.5% Discount Rate” is the amount of funds that CalPERS would have to set aside today, with a 7.5% rate of growth, to be worth $10,000 in 30 years. Yesterday I attended Brea’s Study Session where Brea’s pension liabilities were discussed. I learned that CalPERS raised Brea’s contribution amount by 40% beginning in 2014, (with additional increases projected for future fiscal years).
    The Illinois public pension fund is funded at 50.9%, California’s at 74%, which means that cities and counties in Illinois will go bankrupt before cities and counties in California.

    What Brea (and your city) needs to do:
    • Make cuts in the 2013 budget to build a special for the increased 2014 CalPERS contributions. Raise taxes, but not so high that the city becomes one of Orange Counties least business friendly cities.
    • Work with the city’s Assemblyperson and State Senator for reprieves from state mandates for low-income housing, – green initiatives, and freeze all spending for Governor Brown’s less than “High Speed Rail”.
    • Demand that your city pass on of the Resolutions that passed both houses of other States’ legislatures that call upon the state’s congressional delegation to reinstate the Glass-Steagall Act, – the first of three steps for economic recovery.

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