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California Gov. Jerry Brown: 'A Lot of Cities Signed Up for Pensions They Can’t Afford'

But he's leaving office without really addressing the state's massive public retirement problem.

It's rare that a politician will say something that is praiseworthy and anger-inducing in the same breath. Nevertheless, Gov. Jerry Brown accomplished that unusual feat when he released his May revised budget, and told cities that the state government isn't in a position to help them with their soaring pension costs. "They have to handle that themselves," he explained during a briefing in the state Capitol.

His rationale for refusing to bail out hard-pressed local governments is compelling, concise and worthy of applause: "A lot of cities signed up for pensions they can't afford."

Why should taxpayers throughout the state pay more in taxes—or tolerate fewer services or more debt—to help those city governments that were fiscally irresponsible? They knew the risks, ignored the warnings and retroactively boosted pensions by as much as 50 percent over the past 15 years, yet now city officials are complaining about their tough fiscal position.

Cry me a river. I've heard many city officials speak about the continuing problems they face as the California Public Employees' Retirement System slams them with fee increases to pay for rising pension liabilities. CalPERS has imposed five increases on localities in the past few years and the pension system still is funded at a troubling 70-percent level. CalPERSis the same as it always has been—a union-controlled pension fund that's far more interested in ginning up pension payouts for government retirees than ensuring the solvency of cities. Why did it take so long for city officials to notice?

After the state Legislature passed a pension-increase plan in 1999, known as Senate Bill 400, cities throughout the state eagerly embraced CalPERS' grandiose predictions that it wouldn't cost taxpayers a dime. The legislation granted 50-percent retroactive pension increases to the California Highway Patrol. But its backers had an end game. Once CHP got the boost, most city and county public-safety agencies (police, fire, prisons) would have to pass increases, too. And then each city's miscellaneous workers would receive the old public-safety formula. They knew what they were doing.

Defenders of the legislation claim that it didn't force localities to increase pensions, but that it merely allowed them to do so. That gets to the governor's point. No one forced these cities to make irresponsible decisions. In many cases, local governments tripped all over themselves to increase benefits based on such flimsy promises. In conservative Orange County, Republican supervisors eagerly granted the new "3 percent at 50" pension deal for county sheriffs, then followed with a hike for the rest of the county workforce. The supervisors dismissed warnings that such a plan would backfire.

I cannot recall any city council or board of supervisors anywhere in the state complaining too stridently about this new, cost-free pension giveaway. It reminds me of a scene from the classic movie, "Willie Wonka and the Chocolate Factory." When a child touring his factory jumps into a vat of chocolate and he clearly wants to see what will happen, Wonka deadpans: "Help. Stop. Police. Don't." Do we really think many officials wanted to stop these unsustainable increases?

Now that the pension-boosting legislation has actually backfired, these same officials describe the blowback in the passive voice, pretending it was some unforeseen act of God rather than a direct result of their pandering to local public-sector unions. So Brown is totally correct here. Tough luck. These officials voted for these increases. Now they need to live with the results. The state, which is busy wasting tax dollars in numerous other ways, already has been contributing more than its fair share of the state's own pension shortfalls.

Now for the infuriating part of Brown's statement. Implicit in the governor's message is the notion that the state government couldn't have done anything more to help local governments as they face service "crowd out"—cutbacks in basic services as pension costs eat up a larger share of their budgets. The governor passed an exceedingly modest pension-reform measure in 2012. His team also wrote a noteworthy legal brief to the California Supreme Court earlier this year arguing that the justices should revamp the "California Rule," which limits the ability of governments to reduce pension benefits for current employees going forward.

Beyond that, Brown has basically punted on the issue. And he often has made things worse. The most recent example came last week when he struck a deal with the prison-guards' union to grant them "their biggest raise since the recession," according to a Sacramento Bee report. Large salary increases result in even higher pension obligations. Throughout his governorship, Brown has agreed to pay deals that make the pension problem much worse, which no doubt is a reflection of his career-long political ties with the state's public-sector unions.

After Brown's comments, the San Diego Union-Tribune argued that while his remarks had "surface logic," it was "the state government's actions in 1999 that directly led to the pension tsunami now eating up 15 percent or more of the budget in many cities." The newspaper also noted that Brown's pension reform act hasn't "had nearly the positive effect he promised." Brown "should have kept pushing the Legislature and CalPERS for pension policies that are much fairer to taxpayers." The governor—despite his deep understanding of the pension issue—has essentially been AWOL on the matter as it has escalated into a crisis.

So city officials deserved a good, hard dose of fiscal reality. But it's too bad the governor didn't recognize the other reality: the state government could have done far more to fix the pension system. Brown's ties to organized labor would have enabled him to pull a "Nixon goes to China" and leave a lasting legacy of fundamental pension reform, but chose to leave the problem for his successor. The cities deserve no pity, but Brown could have taken actions to ease their pain.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org. This column was first published by the California Policy Center.

Photo Credit: Paul Simcock Tetra Images/Newscom

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  • Jerryskids||

    You're a very silly man - it's a free lunch, nobody has to pay for it.

  • TGoodchild||

    Jerr-Bear clearly didn't graduate from Local Workers Union #324 Simple Arithmetic School for the Deaf, Dumb, and Blind.

  • Illocust||

    Legacy, pshhhh, the only way to build a legacy in these guys minds is to be the ruler of the good old days, then get out the moment before the house of cards come crashing down. No one will blame you for fucking things up, and instead will say "oh! If only X was still in charge, none of this would have ever happened."

  • Red Rocks White Privilege||

    Back in the 50s and 60s when the post-war boom led to a growth in bureaucratic offices across the public sector, the idea was that a tradeoff existed--if you work for the government, you're going to get paid less than you would in the private sector, but you typically had more job security and a decent pension after you retired. This was based on an assumed rate of return that lined up with the massive economic growth in the US in that era.

    Now the line has changed, and the demand from government workers is that they should get salaries roughly equivalent to their private sector counterparts, but they aren't willing to make the tradeoff for less job security and smaller pensions or 401ks rather than defined benefit plans. On top of that, the economy has gone through two significant corrections in the last 18 years and overall growth has been anemic, so the assumptions of 7-8% growth rates that were established in the 50s and 60s don't exist anymore and these pension plans are about to fall on their ass (and that's not even touching the aging population of Boomers and the 8%/yr rise in healthcare costs since the early 80s). And then these folks act shocked when they're told that they need to contribute more to their own retirement. In Colorado, for instance, if you're a PERA employee, you're not eligible to take Social Security. You'd think putting more into your retirement would be a no-brainer, but they want to have their cake and eat it, too.

  • BYODB||

    Of course on his way out the door Brown is going to castigate everyone else for doing exactly what he's been doing the entire time.


    When a politician is on their way out the door, they love to finally say what they've wanted to say all the while they've been in office. It rarely lines up with what they said during their entire term.

  • NotAnotherSkippy||

    The three letters.

    When a new boss comes into a job he should be provided three letters to be opened in sequence in times of crisis.

    The first letter reads, "Form a tiger team."
    The second letter reads, "Re-org."
    The third letter reads, "Write three letters."

    Thus endeth the lesson.

  • Longtobefree||

    Quick review:
    If you take out more student loans than you can pay back, you should get state help.
    If you cross the border illegally, and can't find work or housing, you should get state help.
    If you want to build a train, but it is not economically feasible, you should get state help.
    If you want to rent in a nice seaside city (SF or Santa Monica, say) but can't afford it, you should get state help.
    If you are a state politician, and want to buy worker's votes, but the state can't pay for it, you should get state help.
    If you are a CITY politician, and want to buy worker's votes, but the city can't pay for it, you should NOT get state help.
    Got it?

  • buybuydandavis||

    Pensions are ponzi schemes. Taxation of the future, without representation.

    Defined contribution plans. Pay as you go. Really, you should just be paid, and you handle your own retirement plans with the funds you receive. Your employer should have nothing to do with any of it.

  • JonFrum||

    So you're deciding what employers can and cannot do? Who made you God?


    Employers have offered pensions to recruit and keep good employees. Such pensions are entered into voluntarily by both parties. So it's none of your business.

  • WoodChipperBob||

    There are two issues here:
    One is government pensions, which, without adequate contributions, are essentially the current legislature mandating a budget item for future legislatures. And since for government pensions, the taxpayer is ultimately the employer and therefore one of the parties, it is his business.

    The second is private companies paying pensions. If they want to give employees a defined benefit pension, and want to structure it and adequately fund it so that the pension program lives on even if the company folds, absolutely. Or if they want to spell out that the plan is tied to future revenues and that if future revenues stop so do the pensions, certainly. Anything other than those two ways of going about things either has a third party who hasn't entered into the agreement at all, or an employer fraudulently misrepresenting its pension plan to employees. The first is his business because governments are usually the third party that the business tries to get the money from, and the second is his business because one purpose of government is to deter fraud.

  • JoeBlow123||

    I am not sure taxpayers really received a vote on pensions, the government just did it. Taxpayers are entirely within their rights to criticize pensions.

  • damikesc||

    I remember when Reason was championing Adam Ruins Everything on TruTV.

    Guess what show thinks we need to bring back pensions because they're more fair?

  • JesseAz||

    If anyone needs to know... Common core math originated in California. It's working out great.

  • JonFrum||

    "Common Core" is the minimum you need to know to graduate with a degree - it's not a special method of teaching math.

  • Rockabilly||

    If I take half of what you have then we are equals in monies. This is 'common core.'

  • Sevo||

    "California Gov. Jerry Brown: 'A Lot of Cities Signed Up for Pensions They Can't Afford'"

    There's a reason for that, and the reason is that son of a bitch who is finally retiring:
    ""Back when Jerry Brown was governor nearly 35 years ago, in his first day in office, he gave public service unions the right to collective bargaining," Republican Meg Whitman said back in April. Her time was off by two years, but the point of her argument was true enough: that granting public employee unions the right to bargain collectively for better pay and benefits paved the way for our state's current unfunded pension liabilities, which may top half a trillion dollars.
    For his part, Democrat Brown looks back at that time with fondness. "I'm very proud to have created this system that gave workers a choice," he told members of the Service Employees International Union – the most powerful union in California – back in March."
    https://calwatchdog.com/2010/10/19
    /brown-ignored-union-bills-warnings/

  • Perseus`||

    President Ford...err...Gov. Brown to the cities of California: "Drop Dead!"

    Refusing to bail out profligate city governments is about the only good thing that Gov. Moonbeam has done during his second reign of misrule.

  • jerryg1018||

    Placing union officials on pension boards didn't help either. Combine that along with deferring state and city contributions to the pension funds and you have a recipe for financial disaster.

  • Rockabilly||

    Comrade, print more monies and the problem is solved !

  • Deplorable Victor||

    Watching Freakifornia go broke will be awesome...

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