Chickens Roosting At Home
Legislative slaves of public employee unions...
[Ray Haynes] 2/27/06

From 1999 through 2002, I was the Vice Chair of the Senate Public Employment and Retirement Committee. During that time, a number of bills presented to the committee increased pension and retirement benefits for state and local government employees. Every single one of these bills were passed and signed by Governor Davis.

At the hearing on each of these bills, the lobbyists for the government employee unions showed up and begged the committee members to vote for the bill. In addition, the representative for the California Public Employee Retirement System (CalPERS) told the committee that the retirement system could afford the increases because it had a $60 billion surplus. The surplus was so big that the state did not have to pay any money to the CalPERS fund, and CalPERS told us we would never have to pay into the retirement system ever again, even with the benefit increases. Of course, the government employee unions control the CalPERS board. The state was experiencing record budget surpluses, so everyone thought that the good times would last forever.

I kept trying to explain to my legislative colleagues that we were being foolish. No one can increase benefits without some cost. At some point, I said, these pension chickens were going to come home to roost in our budget. My colleagues called me Chicken Little telling me “the sky is not falling.” They said the pension was sound and the budget could absorb the cost.

Oops.

The chickens have come home to roost. The City of San Diego is going bankrupt from generous pension benefits. Orange County is talking seriously about filing bankruptcy again to get out from underneath their pension requirements. The state’s contribution to CalPERS is estimated to be $3.5 billion this year, and even higher next year. This is from nothing in 1999.

And this week, the Legislative Analyst’s Office released a report that the cost of retiree health benefits will be “in the range of $40 billion to $70 billion, and perhaps more.” The report identifies two reasons for this increased cost; (a) increased health care costs; and (b) legislatively mandated increased health benefits.

Health care costs have increased significantly in the last six years for one reason: legislatively mandated minimum requirements for health care. From 1999 to 2000, the Legislature passed over 30 different mandates on health insurers, and as a result, costs increased over 40%.

In addition, the Government Standards Accounting Board (GASB) passed new rules on how to account for these increases. GASB statement 45 (GASB 45) increases the information the governments must report to properly assess their liabilities. No longer can the government employee unions, and their management allies, cook the books to understate the liabilities. Once all these liabilities are reported, the government agency must pay for all of the costs of those liabilities.

To the state of California, GASB 45 would require $6 billion in payments, compared to $1 billion today. This is in addition to the state’s already $2-3 billion increase in pension costs, and the existing $5 billion structural deficit, the state is on the brink of a crisis.

I like to use humor to shed light on the oddities of politics and government. Unfortunately, this article is not very funny. We are literally facing a crisis of epic proportions brought on by this Legislature’s slavish devotion to the demands of the government employee unions. These gluttons are literally the fox guarding the chickens, and to mix metaphors, the chickens have now come home to roost. When this system collapses, people will wonder how this happened. Now you know that it is coming, and what caused it. -CRO-

Mr. Haynes is a California Assembleyman representing Riverside and Temecula and frequent contributor to CaliforniaRepublic.org.

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