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Pension Measures Don't Address the Real Problem

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Opinion: Pension Measures Won't Help

I hate to break up the party pensions reformers are having after the victories for measures in San Jose and San Diego last week. Those measures were sold as saving taxpayers money, and limiting risks, by changing pensions for current and future workers.

But if you're a taxpayer looking for savings, don't hold your breath.

The San Diego measure, according to an independent review, won't save any money. There are a bunch of reasons for this, including  the fact that there isn't much in savings to be had by switching new employees over to 401k private retirement accounts (especially in an era when governments are shedding workers and not hiring many employees).

But the main reason is that the measure doesn't control pay from going up. You can say you're cuttting pensions but when you raise pay at the same time too, you're not actually saving as much on pensions.

As former deputy state treasurer Mark Paul (my co-author of a book about California's troubles) points out, "The key budget issue about public employees in California is not about their pensions, it’s about their total pay."

The San Jose measure appears to have a slightly better chance of saving money.

It includes provisions demanding that current employees contribute more to pensions. And it doesn't exempt law enforcement, like so many pension "reforms" do.

But the issue of pay could still limit any savings. And there are also legal challenges that could block the changes -- and thus eliminate any savings.

It's entirely possible that these two measures won't save taxpayers a dime. Which shouldn't be surprising. In California's complicated system, trying to focus in one problem -- like pension risk -- is bound to fail.

Pensions are a symbol of a larger problem: the lack of coherent, accountable, democratic governance at the local level.

In California, the system creates all kinds of incentives for local government officials to boost pensions.

That's because local government officials can't raise taxes -- the people have blocked that option. They can only spend.

That means that when a city councilman in a California city increases a pension, he or she can do that in the full knowledge that he or she is not responsible for raising the taxes to cover those new costs. Because a councilman can't raise taxes in California.

If local elected officials had to raise their own taxes to cover their budgets, would they vote for lavish, unsustainable pensions? The answer is no.

But the San Diego and San Jose measures do nothing to address this problem.

Lead Prop Zero blogger Joe Mathews is California editor at Zocalo Public Square, a fellow at Arizona State University’s Center for Social Cohesion, and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (University of California, 2010).

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