California has had a rough go of it lately. Its cities are going bankrupt up and down the state, and the ones that aren’t are being crushed by pension burdens. Meanwhile, its politicians seem more concerned with expensive vanity projects than with fixing the destructive policies that threaten to wreck the state.This may all be about to change for the better. Over the past few months, we’ve seen signs that California is finally waking up to the threats to its financial future.We saw this in June when San Diego and San Jose passed ballot initiatives to lower their pension obligations. Now a San Diego-style voter initiative is gaining steam in Los Angeles with the impassioned backing of former mayor Richard Riordan. The initiative would shift public employees from defined-benefit to defined-contribution pensions. Capitol Weekly reports:
The proposed Los Angeles 401(k) initiative would get early savings in ways roughly similar to the equal employer-employee contributions called for in the recent reform legislation, AB 304, and the San Diego freeze on pensionable pay:1) Current employees would contribute an amount equal or greater than the city contribution to pensions and retiree health care. It’s not clear from the title and summary whether this split, as in AB 340, is for “normal” costs, not the debt or unfunded liability.2) Pay increases would be excluded from the base pay amount used to calculate retirement benefits if the city pension contribution exceeds 15 percent of pay for most workers and 25 percent of pay for police and firefighters.In a reform of city pension boards similar to a San Jose action, the initiative would add two mayoral appointees to boards now dominated by employee representatives and require some appointees to have financial, accounting or investment expertise.
This seems like a fair deal, but above all it is a way to reduce the huge future pension obligations that threaten to wreck California’s schools and public services while burdening citizens with destructive levels of taxation.Chalk it up as one more sign that, whoever wins at the ballot box today, the era of true blue governance is coming to an end in this country. We just can’t afford it anymore.