Unless some kind of miracle occurs, Sacramento has reached an impasse on the Democrats’ plan to help close the state’s yawning budget deficit via a June election to extend tax hikes.
California now stares at the fiscal abyss, even counting $11 billion in proposed cuts. The state faces a $26 billion deficit (some say it is closer to $30 billion) and has used up most if not all the budget and borrowing gimmicks that previous Legislatures employed to mask the real problems.
Some say it’s wrong that the gridlocked Legislature won’t allow California voters to decide whether they want the last administration’s billion of dollars in temporary tax hikes to be extended.
But let’s say the vote were to go forward and the taxes are approved for five years. What happens between June and when those five years are up?
If past is prologue, probably little if anything would change in Sacramento’s dysfunctional fiscal system, and that’s the basic argument of those opposed to the June election as it was proposed. They say that before asking taxpayers for more money, Sacramento should at least try to fix some of worst fiscal excesses. Let’s take out-of-control pension obligations.
These numbers are real even if the titles are not. A 30-year local government executive retires at under age 60 with an estimated annual pension of well more than $200,000. Solid health care benefits come too.
A 30-year media professional and manager retires with an annual company pension (a rarity itself in the private sector) of a little less than $36,000 – and that’s at age 65. The rest of this person’s retirement income had to be made up via personal savings (and a modest company contribution) in a 401(k) and other investments. And there’s no health care coverage for early retirees and only the tender mercies of Medicare – no supplemental coverage – at 65.
Now, accounting for the fact that the local government executive was highly competent and was responsible for managing much larger budgets and had more reports, perhaps $100,000 or even $150,000 seems reasonable. Right? But $200,000-plus and not even 60 years old?
It is not the fault of any one person and surely not the individual cases are cited here. But the system is unsustainable and fundamentally out of balance.
Pension officials will say the average annual benefit for CalPERS retirees is just $26,000. But that accounts for every government employee who worked for maybe five years and left. The average 30-year retiree receives $67,000, according to a Stanford University analysis. Try that in the private sector.
The public is telling Sacramento to change its ways and, after that, perhaps it will be time to talk taxes.
(Editor's note: Within hours after this column was posted, Gov. Jerry Brown submitted a 12-point pension reform proposal.)
Brad Bollinger is Business Journal editor in chief and associate publisher. He can be reached at 707-521-4251 or email@example.com.