|The problem is leadership, not our pension system|
|Written by Steve Remige|
There is no "pension system crisis" in California but the state as well as many cities and towns do have ongoing budget deficit problems and most are suffering from a shortage of skilled leadership. The stock market declines in 2008 caused significant shortfalls in the projected earnings of many pension systems triggering an increase in government's obligations to keep the fund balances at a healthy level. Of course this shortfall would have been more than covered by the excess earnings of prior years had those now crying saved some of those dollars for the current downturn. But this does not point to a pension crisis.
The public employee pension systems in California are mostly well run. LA County's system-LACERA-is sound. Politicians in state and local governments outside of LA County who have a pension crisis either lack the skill or are not as responsible about how they operate their pension systems.
If pension systems operate by the rules with which they were designed, they do not falter when the market declines or there are budget deficits. If we could, we would force policy makers to go back in time and not spend so much when pension fund investments are earning well.
That way excess earnings would be available to get us through the down-market years. Here at ALADS, our members pay a portion of their salary every month into the pension system. Editorials critical of "generous public safety employee pension compensation," routinely neglect to mention that 80 percent of the funds paid out to retirees stem directly from the employees' contributions and the interest earned on those contributions.
If there is no pension crisis, why do so many people have a solution? The answer is Wall Street. State and local governments have grown in size to the point where California's public employee pensions funds are now major financial players. Many critics like Meg Whitman suggest switching new public employees to a "defined contribution" 401-K type plan.
That switch would take the investments away from the responsible pension funds like LACERA and deliver billions of dollars into the hands of Wall Street investment bankers. This is good for the bankers but bad for small investors and anyone who is counting on a secure retirement.
If your friends complain about your pension, just remind them the system was sound when you were hired and no amount of pension reform is going to cause policy makers to manage state and local governments any better. Effective management does not come from blaming the employees.
Good government comes from smart leaders. What we have in California is a leadership crisis. Perhaps that is something we can fix in November.