Free Minds & Free Markets

Jerry Brown Finally Spends Political Capital to Fix Pension Crisis

The California governor is starting to take on the public-sector unions he has spent his career empowering.

Gov. Jerry Brown (D) has more political capital than, perhaps, any modern politician has had in California. He's an iconic figure and smarter than almost anyone else in Sacramento, so he can pretty much have his way with the legislature. A lot of us have wondered, though, why—almost seven years into his latest governorship—he has been so unwilling to tap that treasure trove and spend it on something really important.

Until now. Brown recently has weighed in on a state Supreme Court case that—without exaggeration—will determine the fiscal future of California's municipalities. It's a seemingly obscure case about a union benefit known as "airtime," but it's really about the ability of state and local governments to roll back future pension benefits they can no longer afford.

Brown has had major accomplishments, but mostly of the type (tax raising, extending cap and trade) one should expect from a governor working with supermajorities in his own party. Political capital is about investing in something important that cuts against the grain. In this case, Brown is taking on the public-sector unions he has spent his career empowering.

There's no question Brown and his team understand what's at stake. In 1999, California passed a law that started a wave of retroactive pension increases that were predicated on the idea that stock-market increases would endlessly pay for all those six-figure pensions and spiking gimmicks. But what goes up must come down. Instead, the state's pension funds are dangerously underfunded and localities are slashing services to pay for golden retiree deals.

Brown's Public Employees' Pension Reform Act went into effect in 2013. It was a welcome, albeit modest, reform. Its passage was largely about convincing voters to approve Proposition 30, which raised taxes and plugged a gaping budget hole. At the time, pension abuses were front page news and state leaders needed to reassure voters that they were indeed fiscally responsible and could be trusted with more revenue.

In this particular court case, a firefighters' union challenged the law's elimination of the airtime benefit. Airtime allows union workers to buy additional fictional years of service and artificially boost their pension checks. Advocates for the deal promised that it wouldn't cost anything, but the state underpriced the benefit and it became—no surprises here—an appalling giveaway.

A series of court decisions has created the "California Rule." It means that once a public employee receives a pension benefit it can never be reduced unless that employee receives something of equal or greater value. It is the main hindrance to reining in soaring pension costs that are eating up municipal budgets and causing city officials to become pension providers that offer a few services on the side.

Most pension reform ideas, whether pursued legislatively or via initiative, run into this impediment. Sure, PEPRA and many local governments have reduced pensions for new hires. But it will take decades before those people retire. Governments are left cutting services, laying off employees and raising taxes and even mulling bankruptcy because there's little else they can do. The California Rule locks in unsustainable benefits for current workers and retirees.

The unions argue that eliminating airtime violates that rule. It's a poor argument—and an even more foolish legal strategy. But significant reforms often are born of hubris, and union greed has opened the door to the kind of wide-ranging changes to the California Rule that are imperative if we're going to keep local budgets afloat. If these unions had accepted a few minor benefit rollbacks, there would be no threat to their gravy train.

The simple argument made by the Brown legal team is eliminating airtime does not violate the rule. It was never meant as a taxpayer-funded benefit (it was supposed to pay for itself). When the Legislature created it in 2003, it never "intended to extend an irrevocable offer to purchase airtime and prevent future legislators from adjusting benefits for the fiscal health of the state's pension system."

That's spot on, but the real news is that the Brown administration is challenging the California Rule at a much deeper level. Even if the airtime option "somehow became a vested contract right, the Legislature did not violate the contract clause by withdrawing the option from current employees," according to the administration's brief. It quoted a ruling noting that "not every change in a retirement law constitutes an impairment of the obligation of contracts."

The administration brief is in keeping with lower-court rulings, which found that public employees have a vested right to a reasonable pension but not to a budget-busting pension that can never be tweaked or reduced. Brown has gone where the state's union-allied attorney general (and past attorney general) apparently wouldn't go. He finally is spending his capital to take on the unions, but it's a crucial investment even if late in coming.

This column was first published in the Orange County Register.

Photo Credit: marriageequality/flickr

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  • Telcontar the Wanderer||

    "But significant reforms often are born of hubris"

    -1 Tojo administration

  • Rockabilly||

    '...smarter than almost anyone else in Sacramento, ...'

    What a sad state Comrade!

  • AlmightyJB||

    Poor Sacramento

  • BambiB||

    But it would explain why Kalifornia went so heavy for Hitlery!

    8,753,788 idiots.

  • J2Hess||

    I can't believe how bright and witty you are!

  • BambiB||

    If true, it's not just sad... it's rather terrifying!

  • Longtobefree||

    Can some one fact check the date? It must be April first.

  • Principal Spittle||

    The stretching of the capital metaphor is no longer necessary in Ca. These obscene criminals haver made each other so much real capital at our expense it is insulting to suggest they should be praised for something that "seems" contrary to their nature.

  • Citizen X - #6||

    He's an iconic figure and smarter than almost anyone else in Sacramento

    Truly a giant among midgets.

  • ||

    In fairness, while even Tony would be smarter than almost anyone else in Sacramento, Jerry is, in fact, pretty smart.

    He's also a pretty bad combination of self-righteous and corrupt, and has been surrounded by stupid and incompetent people for decades such that he really sees himself as a sort of God-Emperor here to lead mankind to Redemption.

    Everything Jerry does, and I mean everything, is unilateral.

  • Jimbo||

    Don't forget the guy was in the seminary in his younger days. He gave up on God when he determined where the REAL power was: Government.

  • Rhywun||

    Ah - he's the Andrew Cuomo of California.

  • Devastator||

    Eh typical small minded political people. Just because someone doesn't agree with your politics doesn't make them stupid. He is obviously a smart guy, he has just bought into the wrong policies. Maybe he is coming around a little bit and realizing taxes are finite.

  • Deven||

    No, it makes them stupid OR evil.

  • J2Hess||

    If you really really mean it, it means you really really haven't been paying attention.

  • Jimbo||

    He's 6'9" with the afro.

  • gah87||

    Rat among mice.

  • Ama-Gi Anarchist||

    I may get hate for saying this, but fuck Commiefornia. Fuck Jerry Brown and fuck the idiots who thought sucking off the "Public Sector" for years on end was a good idea. Every one of those assholes who voted, balloted and pushed for these pension excesses should hang together.

    The asswipe "Teachers" here in the Tampa Area (Pinellas County specifically) are protesting the fact they're not get a cost-of-living increase. When my uncle told me (who is a big supporter of unions) and suggested that the teachers should all walk out en masse, I almost laughed and told him that would be an improvement since Public School is about as close to Prison as you can get without committing a "crime".

  • J2Hess||

    You sound almost as rational and reasonable as a Bernie Bro!

  • Kyfho Myoba||

    "Democracy is the theory that the common people know what they want, and deserve to get it good and hard." - H. L. Mencken

  • Trollificus||

    In my more innocent days, I might have thought that having the entire budgets of cities going to plush quarter-million-a-year pensions based on easy promises to public employee unions would maybe wake up some of the fucking idiots who kept voting in the people responsible.

    But now I know better. They'll blame Republicans and ask for a federal bailout.

  • Rhywun||

    lower-court rulings, which found that public employees have a vested right to a reasonable pension

    And that right there is the root of the problem. Where is this "right" coming from?

  • Mitsima||

    It comes when greed is transmogrified into 'need'.

  • Kivlor||

    "Right" is probably a poor choice to describe it. They certainly have a vested interest, if they've worked for very long.

  • ||

    It's not a "Right" from a Natural Rights sense, but a contractual obligation that the State cannot absolve itself from.

  • ||

    It's not a "Right" from a Natural Rights sense, but a contractual obligation that the State cannot absolve itself from.

    ^ This.

    The first step is to reduce benefits for new hires, and the next/simultaneous one is to reduce dependence on the public sector.

  • J2Hess||

    Yeah, why don't we have tax farmers any more?

  • Migrant Log Chipper||

    Hey dead thread-fucker: piss off.

  • Trollificus||

    The "can't ever go out of business" aspect of government means the entire dynamic on which unions are based does not exist. So...the ultimate step is to destroy the existing public employee unions and come up with iron-clad, lawyerproof* legislation banning government employees from ever, ever unionizing.

    If we're unwilling to accept that, we're screwed.

    *-yeah, I know. Also, dead threadfucking.

  • BYODB||

    Somehow, amusingly, time and time again people think that they can lump money together to pay people not to work yet invariably those programs fail.

    Somehow, very few ever seem to connect those dots.

    Brown is being forced to recognize it now, but something tells me he's out of his damn mind if he thinks he'll get any traction to push against the juggernaut he helped forge.

  • Devastator||

    Exactly. No one has a right to a pension; they may have negotiated it and the state of california has to respect contracts that it has made, but in no way are they entitled to a pension as a right. Definitely communist thinking going on there. One day there will be reckoning and they'll just pass a law that says "all your pensions are belong to us" when they can't borrow any more money.

  • marshaul||

    A contractual obligation by the state creates an enforceable right for beneficiaries of that obligation in every legal sense. It's not a Natural Human Right, but it is a right.

  • J2Hess||

    From contracts freely negotiated and under the rule of law. Libertarians used to believe it that stuff.

  • Kivlor||

    I think a lot of the issue here is that we guarantee politicians complete immunity from the consequences of their bad policies. They have zero skin in the game, and their only incentive is to be reelected in the short-run. The voters will like you more if you spend more on them and services they use, which leads to raids on pension funds in order to get those votes. If you can't be held personally liable for raiding the coffers, then there is no reason not to. So why not hire some "experts" to provide some creative accounting that says we really don't need that much money put away for the pensions, as long as we are really aggressive with investments 20 years from now, and as long as nothing goes wrong.

    The unions are a problem. And so are the very high pensions. But they are minor compared to having people with tremendous power who have zero skin in the game.

  • creech||

    John Conyers played this game for more than fifty years and could have done so until death if he only kept his dick in his pants. How does one run against Santa Claus?

  • Jimbo||

    How does one run against Santa Claus? Easy: Have the elves accuse him of grabbing their junk.

  • ||

    they are minor compared to having people with tremendous power who have zero skin in the game.

    ^ This. And voters in urban California largely don't understand this. They think the people in power having no skin in the game is better because they're not polluted by an icky profit motive.

  • Earth Skeptic||

    So, how about making elected officials personally financially liable for programs that go under? The few rich ones may actually then help make up deficits, and all of them might think twice before promising the moon.

  • J2Hess||

    Because the elected officials who created this problem are retired or otherwise aging out of office, and if you read the article you'd remember the mention of legal impediments to imposing unilateral changes.

  • MoreFreedom||

    The government pensions wouldn't be a problem if a) they were defined contribution like almost all private plans rather than these gold plated defined benefit with airtime plans, b) government employees were paid like they should be - with less income than the average in the private sector, and c) we didn't have too much government like we have now.

  • J2Hess||

    A) Just because you turned your back on unions and lost defined-benefit pensions doesn't mean everyone else has to follow.

    B) They are paid less than the average in the private sector and that's not been news for decades - where have you been?

    C)The trouble is, all anyone wants to cut is the part of government that helps the Other guy. And since we decided to become imperialists in the Spanish-American War, no (well, almost none) Republican will vote to cut the military budget

  • Enjoy Every Sandwich||

    I sometimes wonder what's going to happen when sooner or later there simply won't be any money left to pay these benefits. What if the taxpaying residents of a town just say "okay, I'm through with this" and just leave?

  • Rhywun||

    What if the taxpaying residents of a town just say "okay, I'm through with this" and just leave?

    Saint Louis, Detroit, Cleveland, and Buffalo would like to have a word with you.

  • Brandybuck||

    Trouble is, California are where the jobs are. I'm in the tech sector and a few years ago I traveled around to different firms in different states. Most places outside of California had really good work environments, but if one lost their tech job there was no place local to fall back on. No so in California, and the Bay Area in particular, It's where the tech jobs are.

    The downside is that it costs a hell of a lot to live here. Which is my my retirements plans include moving out of state.

  • AlmightyJB||

    Hopefully as the economy starts rebounding, so will the job opportunities.

  • Devastator||

    Why would the economy rebound? Trump hasn't done a thing and neither has Congress.

  • NotAnotherSkippy||

    Not really. Plenty of other places to go. The world is bigger than google and facebook. And that's true even if you're a software engineer coder systems analyst programmer.

  • Rhywun||

    Yeah, my company is based in Cleveland believe it or not and there are hundreds of tech jobs. And it is dirt cheap to live there. If I didn't like NYC I'd consider moving.

  • Diane Reynolds (Paul.)||

    Ok, no one is suggesting Cleveland here.

  • Rhywun||

    Heh - I'm sure it has its charms. I lived in Buffalo for many years and there is a lot that I miss about it.

  • KBeckman||

    Lake effect snow?

  • Devastator||

    Yeah but then you would have to live in Cleveland. It's moniker mistake by the lake is not a fiction, it's a reality.

  • Diane Reynolds (Paul.)||

    The downside is that it costs a hell of a lot to live here. Which is my my retirements plans include moving out of state.

    There are plenty of other places in the country that have a strong tech sector. No, you might not get the same pay (although in Seattle I suspect you would) but if you did a hard look at the cost/benefit analysis, you'd probably find you might actually be ahead in a much lower cost of living area.

  • Devastator||

    Dallas, Austin, Houston in Texas, easy as hell to find a tech job, no reason to be in Calitaxia.

  • marshaul||

    Brandybuck is merely demonstrating a fair bit of choice-supportive bias here. I'm an EE, which certainly counts as a "tech job" (and the economic infrastructural support is also "tech"), and CA isn't even a very good market.

    I keep seeing people say "but CA is where the jobs are!" There are openings for sure, but when you factor in cost of living, quality of life, regulatory onus, there are much better markets. No shortage of tech jobs here in VA where I'm working now.

  • Scarecrow Repair & Chippering||


  • Trollificus||

    Zackly. You can sign a legally binding contract to give your daughter a unicorn for her 6th birthday, but she's not getting a unicorn. Still, whenever reality collides with progressive delusion it gets pretty ugly.

    Also, J2hess sounds like a big-time double-dipper to me.

  • Sevo||

    Of course, if he hadn't signed the Dills Act, the political cost of reining in benies wouldn't be nearly so high.
    In fact, you could almost say he caused what he is not (supposedly) going to fix. And on the later, I'm not holding my breath.
    Sort of like the 'drought problems' he's now trying to fix; caused by his distaste for any sort of water storage facilities; not 'green' enough.
    California would be a better place if Mr and Mrs. Pat Brown had had an abortion.

  • AlmightyJB||

    I'm not holding my breath on this either. I wouldn't care except I fear that the feds will end up bailing them out.

  • NotAnotherSkippy||

    As long as we have those stupid, troglodyte flyover states and their senators, California ain't gettin a bailout.

  • Jimbo||

    "Can I get an amen?"

  • NotAnotherSkippy||

    Pretty sure that the only solution to california is geological. In a few tens of millions of years it will finally be physically connected to its communist brethren.

  • Brandybuck||

    To be fair, there are only so many rivers one can dam up in California. The problem is that the state has outgrown its water supply. it's not Brown so much as it's old fashioned population growth. Pretty much the only thing left to dam up is the San Fransisco bay itself. And I've heard people seriously consider that. It's easy to talk about dams, but not so easy to point to a spot to put one.

    For example, none of the watershed of the southern Sierra Nevada flows to the ocean. It all goes to agricultural acreage in southern San Joaquin Valley. There's nothing left to dam up that would do any good. Every single drop of rainfall is being captured.

    The real problem is that no one pays for the water they use in California. It's a hodge podge of water rights for cities and farmers, they may pay for access but they do not pay for acre feet. In the middle of the real drought I saw farmers still flood irrigating their crops. Drip irrigation for fruit trees remains a rarity. it's not just the farmers. Fresno city voters have routinely rejected every measure to install water meters.

  • CE||

    You can't build new dams in California. The political momentum is toward tearing down the existing dams, to re-wild the watersheds. People bad, hydro-power and nuclear power not green.

  • ||

    It's a hodge podge of water rights for cities and farmers, they may pay for access but they do not pay for acre feet. In the middle of the real drought I saw farmers still flood irrigating their crops.

    And in the Delta, where the most-senior water rights are, they were pumping millions of gallons straight into the river in order to preserve their annual water budget.

    For those who don't live on the West Coast - CA water rights are exactly like government funding. If you use less this year, you get less next year.

    For all of Jerry's bloviating about how we normal citizens needed to cut back on the 15% of the water we use, the system of seniority rights that leads to actual water waste was never addressed.

    Jerry the Environmentalist for you.

  • Devastator||

    They could invest in desalination plants, they just won't until the Colorado river is dry. I think the first thing to go will be the farms since they use 80%+ of the water in California.

  • Sevo||

    "To be fair, there are only so many rivers one can dam up in California."
    Yes, and some have not, let alone other alternatives.
    You seem to think that reservoirs simply "stop" rivers rather than collect excess in time or plenty. IOWs, it's not a zero-sum issue.

  • ||

    caused by his distaste for any sort of water storage facilities; not 'green' enough.

    But the Delta tunnels are just fine . . .

  • Eidde||

    "smarter than almost anyone else in Sacramento"

    Smarter than other California politicians? What an intellectual powerhouse he must be!

  • CE||

    They were smart enough to get their hands on all our money.

  • MarkLastname||

    Not so much 'Alexander Fleming smart' as 'Carlo Gambino smart.'

  • Devastator||

    They rival the median intelligence level of Reason commenters, so I wouldn't get to high up on my horse.

  • Migrant Log Chipper||

    Psst: Dead thread-fucking troll, piss off.

  • CE||

    At the time, pension abuses were front page news and state leaders needed to reassure voters that they were indeed fiscally responsible and could be trusted with more revenue.

    They can never be trusted with any revenue.

  • pashley||

    Reality is conservative; limited resources, time, money. The skirmish may be keeping a school in California open or not. (though look at results, and convince me closing CA schools is a bad thing). But the shortest and surest route to sane (conservative) thinking is the embrace a bit of searing reality.

    Keep the pensions where they are, in all of their insanity. Older retirees taking their pension (tax) money to Florida or Texas or Arizona or Costa Rica. Let a new generation of child-rearing parents witness their parks wither, libraries close, home values decline, police and fire departments vanish. Maybe stay and suffer; maybe move to where the public employees have not (yet) pillaged the community.

  • The Last American Hero||

    I hope the court strikes it down so Californians have to eat the shit sandwich he made and other states can learn a lesson.

  • Empress Trudy||

    I suspect this is window dressing. Gov Brown will go to the unions, whine, they will laugh in his face and he'll go home and tell everyone he tried but for the evil white male cisheteropatriarchy and Trump, everything in California would be free.

  • Earth Skeptic||

    So if a city, county, or state cannot pay promised pension benefits in cash, due to overgenerous commitments and insufficient income (and for some, essentially bankrupt finances), how about dividing up government assets and handing these out? How much fun would that be, when some cop or fire-fighter gets the deed to some city property (and then has to maintain it and pay property taxes) instead of cash?

  • IMissLiberty||

    Well, I seem to recall he took a principled stand against the death penalty back in the 1970's during his first term. But I was much younger, then, and may not recall all the details. He also refused to live in the governor's mansion, and drove an old car. I'm guessing that economics ignorance is a principal failing of his, rather than any kind of malicious agenda.

  • Johnimo||

    As if! Now, we're supposed to admire Brown for "standing up" to the unions? Good luck with that shit. The State will eventually have to pay the piper; just don't ask the rest of us to chip in.

  • thisbrucesmith||

    "There is an ancient Vulcan proverb: Only Nixon could go to China."

  • PaulTheBeav||

    Democrats broke it.

  • Migrant Log Chipper||

    The horse has been out of the barn for far to long. It will, however, be amusing watching the unsane clown posse chasing it around. (Cue calliope music)


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