Ed Driscoll

'How Public Pensions Killed Progressive California'

At Reason, Tim Cavanaugh writes, “California is that rarest of land masses for the 2011 Democratic Party: conquered territory. State Democrats have freedom to rule virtually unchallenged by the scattered, rusticated Republicans:”

As 72-year-old Jerry Brown enters his second governorship, he has an agenda to match that power, with visions even greater than those that haunted his two-term administration of the 1970s and ’80s: building 20,000 megawatts of renewable power, laying a new high-speed rail network that will connect the state’s major cities, forging a statewide infrastructure for alternative energy, hiring thousands of green employees. The new governor’s environmental agenda is ambitious, untenably expensive, and indelibly popular with voters and lawmakers.

Yet when Brown looks out on Democrat-controlled California, he seems less like Caesar at the Rubicon than Wojciech Jaruzelski at the Gdansk Shipyard. Brown is champion of a workers’ party with monopoly control, yet all his plans are being derailed by a labor movement nobody can harness.

At press time, California was being governed under a state of economic “emergency” declared by Brown’s predecessor, Arnold Schwarzenegger, in light of a staggering $28 billion budget shortfall expected in the next 18 months.

It gets worse. Medium-term unfunded liabilities for government employee pensions are pegged by the Legislative Analyst’s Office at $136 billion—and that’s a lowball figure. Legislative analyst Mac Taylor acknowledges in his current fiscal outlook report that the estimate leaves out billions in funding shortfalls at the pension funds for public school teachers and University of California employees. In the next 10 years, taxpayers will most likely be on the hook for somewhere between $325 billion and $500 billion. (Over the past five years, state revenues averaged $94.5 billion per year.)

How did this happen?

California’s state and local governments employ somewhere between 1.5 million and 2 million workers, representing 4 percent to 5 percent of the state’s total population. When they retire, all of those employees are contractually entitled to generous pension benefits—so generous that, collectively, they can’t be paid even by a pension system that ladles out more than $20 billion a year and is one of the largest investment pools on Wall Street.

California is not the only state infected by pension liabilities, but the size of its economy (generally described as the eighth largest in the world) and its union-dominated politics make it a gravely stricken, and potentially contagious, patient. Organized labor contributed tens of millions of dollars to Brown’s campaign last year, and public-sector unions have long been the largest donors to the Democratic politicians who control the state.

“The unions have a stranglehold on this state,” says Marcia Fritz, a Citrus Heights accountant who serves as vice president of the California Foundation for Fiscal Responsibility, a pension reform lobbying group. “To engage them you need your biggest strategy. It’s like trying to topple a communist government.” But like communism, which eventually ran out of other people’s money, California is teetering on fiscal implosion.

As James Taranto writes, “Here is the contradiction of progressivism:”

Progressives tell us they want the government to do more. But they can’t win elections without public-sector unions. Because they are beholden to those unions, their main priority when in power is to increase the cost, not the scope, of government. Because resources are finite, the result is the worst of both worlds: a government that taxes more without doing more. This is unsustainable economically. Fortunately, as Wisconsin voters showed last November, it’s unsustainable politically as well.

But California voters chose a very different route this past November. Not coincidentally, Doug Ross lists the “Top 10 Reasons Businesses Flee California.”

(Meanwhile, despite all of the fiscal turmoil in the state, its citizens remain focused on the key issues of the day.)