Jon Coupal is President of the Howard Jarvis Taxpayers Association and is also a Western CPAC board member. Coupal will be introducing Scott Rasmussen, Founder and President of Rasmussen Reports during WCPAC, which is on Oct. 15th and 16th at the Radisson Newport Beach.

Jon Coupal: California's future rests on swift pension reforms
By Jon Coupal
Jon Coupal is president of the Howard Jarvis Taxpayers Association. Contact him through the organization's Web site, www.hjta.org.
Posted: 09/29/2010 07:37:39 PM PDT
Updated: 09/29/2010 07:38:17 PM PDT

DURING the Great Depression, "California or Bust" was the slogan of economic refugees from other parts of the country on their way to the Golden State. But if Sacramento fails to reform our government employee pension system immediately, the slogan for those fleeing California will likely be "Busted by California."

According to the governor, the Big5 have agreed on a "framework" for resolving the record-breaking budget stalemate. We hope so. And we hope that part of the agreement entails serious pension reform. If it does not, these obligations will continue to overwhelm the state as well as local governments, drive the state into virtual bankruptcy and leave no revenue for essential services.

The direct cost to taxpayers to pay pensions for now-retired workers has skyrocketed over the last decade, from $150 million to $3.5 billion, a big part of the reason Democrats want to raise taxes by $4.4 billion. Meanwhile, a recent Stanford study found CalPERS, the California State Teachers Retirement System and the UC Retirement System have an unfunded liability of a half a trillion dollars.

Because this horrific situation is only getting worse, it is imperative that lawmakers end their procrastination in dealing with this issue.

The main problem, of course, is that any defined benefit plan is a gamble for taxpayers. Unlike defined contribution plans, taxpayers are utterly exposed to bad decisions by those who manage the funds. The foolish investments
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by PERS and STERS in equities and real estate, coupled with huge increases in pension benefits (by as much as one-third) have left taxpayers on the hook to make up massive shortfalls.

Reforms must be enacted now as part of the budget deal and those reforms must be substantial, not minor.

First of all, the rules for new hires must be changed. Long-term savings can be achieved by switching from a guaranteed benefit system to a system that provides a guaranteed retirement contribution, as is the standard in the private sector.

Second, we must more strictly define those who qualify for the higher pensions provided to those defined as "public safety" workers. Most taxpayers support superior benefits for those who put their lives on the line, like police officers and firefighters, but do not think that milk and billboard inspectors should receive higher payments.

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