Wrong Vehicle for Pension Reform

Pensions should be sacred. But Proposition 162, an initiative constitutional amendment drawn up to protect public retirement funds from future state budget-balancing raids, would give too much clout to pension governing boards.

The measure, on the November ballot, would also require public pension systems to give highest priority to providing benefits and less consideration to taxpayer cost. Although the specific fiscal effects are unknown, the measure could allow pension abuse, particularly in local funds, that could cost taxpayers a bundle.

California’s public employees have every right to be concerned about the conditions of hundreds of city, county and special pension funds and the two major state funds. The California Public Employees Retirement System (PERS) holds $64.3 billion and the State Teachers Employees Retirement System (STERS) holds $30 billion. These funds are rich, and they have appeared even richer amid the state’s recent budget problems.

To balance the 1991-92 state budget, Gov. Pete Wilson and the Legislature grabbed $1.9 billion from supplemental state pension reserves.

Those dollars had been designated to compensate retirees in times of high inflation by restoring 75% of the purchasing power of public retirement checks. That raid on PERS prompted Proposition 162, which requires a simple majority to pass.

In another political grab, PERS also lost the right to appoint independent actuarial staff members--the accountants and experts who determine how much the state must pay into the fund. The governor gained the right to name the state actuary, who would be confirmed by the Legislature. The actuarial staff is key because a 1% change in the calculation of the state’s annual contribution could result in hundreds of millions of dollars in savings or additional payments. Restoring that authority to the well-run and responsibly managed PERS would certainly remove politics from those calculations. But Prop. 162 is not the best vehicle for this reform.

Nearly 1.5 million Californians depend on public pension funds. Retirees earned these benefits. Former firefighters, police officers, teachers, judges, civil servants and other public employees deserve every guarantee that they can count on their retirement checks. Current public employees, who sacrifice the higher earnings and other perks prevalent in the private sector, also deserve similar assurances. They can get those assurances from the state Constitution, which safeguards standard pension funds from tampering by politicians.

Proposition 162 won’t restore the dollars ripped off from the supplemental pension reserve accounts. The ballot measure also won’t adequately protect taxpayers. We urge a “no� vote.