"The old joke is that General Motors is just a health insurance company that makes cars on the side," San Luis Obispo County Supervisor Adam Hill said during a pension presentation at a recent board meeting. "My concern is that the county government is becoming a pension provider that provides government services on the side."This is separate, mind you, from the $500 billion that various California governments have promised to state workers past and present. So, how the hell does something like this happen? Let the Bee run some numbers:
Yet today's escalating annual pension payments barely touch the looming shortfall: $28 billion in unfunded liabilities – the difference between what pension systems have and the pension benefits their employees have earned – at the 80 largest city and county governments in California, according to an extensive Sacramento Bee review of pension plan valuation reports.
About 85 former members of the Sacramento Metropolitan Fire District earn annual pension benefits of more than $100,000, including former chief Donald Mette, who makes almost $241,000 a year in retirement, according to a list obtained from CalPERS by advocacy group California Pension Reform.
In Roseville, 17 former employees earn north of $100,000. In Merced County, it's 37. In Stanislaus County, it's 50.
That's pretty daunting stuff. According to the 2000 census figures, Merced County, a largely agricultural area north of Fresno, had about 210,000 residents. Its neighbors to the north in Stanislaus County had around 460,000 residents, many living near Modesto. Not surprisingly, most of these counties don't have the resources to pay off the promised pension benefits.
So who wrote the checks in the first place? Anyone with even a passing knowledge of California knows the answer, but we'll let the Bee explain:
All of them can thank former Gov. Gray Davis.
In 1999, Davis and the state Legislature passed a generous set of pension upgrades. Most public safety officers came out on top, eventually receiving 3 percent of their salary per year of service for life, after reaching age 50. The improvements were heavily supported by labor unions, which had contributed large sums to Davis' election war chest.
Nearly all California cities and counties followed Davis' lead, often passing clauses that mandated better pay or benefits if a neighboring jurisdiction received them.
If you had the same sorts of rules about self-dealing in public sector as exist in the private sector, chances are good that Davis would have been bunking in the same cell block as Bernie Madoff or Tom Petters. But we'll leave that aside for now. Why the hell did Davis and his cronies believe they could make such outrageous promises? The Bee has the answer to that one, too:
While those "me too" enhancements get the most ink, they're only one factor – and probably not the largest one at that – behind the pension morass facing cities and counties. The other three factors:So they got all the money and huge pensions to boot. Yeah, I could see where that might get a little spendy, as we say in Minnesota.
• Faulty assumptions about the stock market.
• Bad advice from some professional advisers.
• Hiring followed by a plethora of raises.
It's a simple calculus: The more money government employees make, the more they'll get in retirement.
Average pay at all California local governments rose 40 percent from $46,073 in 2000 to $64,284 in 2008 – a much faster rate of growth than inflation, according to the U.S. Census Bureau. To keep up with inflation, those employees would have needed just a 25 percent raise.
But all this mess is California's problem, right? Not our problem, right? Well, when you look at the total bill for all the states and municipalites out there, we could be looking at something on the order of $1 trillion.
If you've been watching the current travails in Greece and have marveled that a government could mismanage things that badly, you might want to consider that we are pretty much hip deep in spanakopita ourselves.