The San Diego public employee pension account is underfunded by huge sums of money. CalPERS, the state public employee pension plan, is also dramatically short of money necessary to cover its liabilities.
Actuaries predict the Social Security trust fund will be exhausted as early as 2016. But that ignores that there is no actual repository of money for Social Security. The money has been borrowed by the federal government.
Stockton just declared bankruptcy because its retirement and health benefit costs were out of control. Vallejo did the same thing a few years ago.
California’s Park Service officials were surprised to learn there were millions of surplus dollars quietly sitting in a pair of accounts while plans were announced to close some parks because there was no money to maintain and manage them. In San Diego County, nearly $14 million was held in reserve to provide roadside safety services, including managing the emergency call boxes that were in declining use. When that was revealed, rather than reduce the fee that drivers pay to support the program, legislators just transferred the program to another group of officials.
One morning, the citizens in Bell, Calif., awoke to learn their duly elected and appointed city officials had allegedly been paying themselves exorbitant salaries and benefits. California’s controller is investigating paperwork problems for the San Diego Unified School District pension program. The controller is concerned that pension spiking may have occurred; the same kind of investigation is under way in San Francisco’s public school district. Maybe it’s just a paperwork snafu.
Voters in San Jose and San Diego voted to reform the pension plans for their city employees. They were clearly dissatisfied with the apparent abuse by elected and appointed officials.
There is one common element in all of this: Elected or appointed public officials guided every fund, pension plan and financial account. Given that abysmal record, who would think more government oversight is a good idea?
At this writing, there is a measure on Gov. Jerry Brown’s desk, Senate Bill 1234, that would require some private businesses to enroll in a state-sponsored retirement program with state officials in an oversight capacity. The requirement would apply to companies with more than five employees if the firms do not have their own retirement plans. In other words, despite all the mismanagement, confusion, mistakes, poor estimates of returns, apparent theft in some cases and a myriad of other problems, this bill’s sponsors want more government control and involvement, this time over private pension plans in California. That is a recipe for disaster.
State Sens. Kevin De Leon of Los Angeles and Darrell Steinberg of Sacramento, both democrats, sponsor this legislation. Aren’t they in the real world? What can they be thinking after seeing example after example of lousy management and decisions by others resulting in numerous financial Armageddons? It must be the standard chutzpah that seems to dominate most liberal planning. “I know those other guys got it wrong, but my approach is better. I can do this.” Trouble is, they seldom can “do this.” They almost never do it better.
Well-respected economist Milton Friedman said, “There's been one underlying basic fallacy in this whole set of Social Security and welfare measures and that is the fallacy — this is at the bottom of it — the fallacy that it is feasible and possible to do good with other people's money. That view has two flaws. The first being, if I want to do good with other people's money I have to take it away from them. That means that the welfare state philosophy of doing good with other people's money, at its very bottom, is a philosophy of violence and coercion. It's against freedom, because I have to use force to get the money. In the second place, very few people spend other people's money as carefully as they spend their own.”
Perhaps the most telling comment about SB 1234 is from a retired San Diego State University finance professor. In a U-T San Diego interview, Tom Warschauer said he believes the bill could have an unintended consequence. Companies that would not otherwise have done so, he suggested, might start looking at retirement programs to avoid the state system.
I doubt that is what motivated the legislators who voted for this measure.
Hawkins is retired after 35 years as a construction industry association manager. He was a broadcast reporter and news anchor in Denver. As a Navy officer, he saw action in Vietnam in the River Assault Squadrons and is the recipient of a Silver Star and Purple Heart. He can be reached at firstname.lastname@example.org.