TEN BILLION HERE, TEN BILLION THERE...

Cozy state pension deal costs taxpayers billions (Daniel Weintraub, August 10, 2003, Sacramento Bee)

On the afternoon of Sept. 10, 1999, as the Legislature was preparing to adjourn for the year, state Sen. Deborah Ortiz of Sacramento rose on the Senate floor and asked her colleagues to approve a measure to raise the pensions of state employees.

Speaking for less than 45 seconds, Ortiz mentioned first that the bill would give the Senate's own security staff the classification of peace officer, which would enhance their retirement benefits. She rattled off the new retirement formulas that the bill created for each group of state workers. And she said the legislation would allow state employees who had been in a less generous and less expensive retirement plan to jump to the state's top tier retirement program.

"It's got all the provisions that have been negotiated, and I ask for an aye vote," Ortiz concluded.

She got it. Without a word of debate, and not one question, the Senate quickly approved the bill, SB 400. The vote was 39-0. One member was absent.

The measure approved that day will cost taxpayers at least $10 billion over 20 years, plus uncounted billions for similar increases granted later at the local level. The legislation began a wave of public employee pension increases at a time when private sector employees were seeing their own retirement benefits shrink or disappear entirely. And the bill relied on a fundamentally flawed assumption -- that state employees, not the taxpayers, were entitled to the fruits of the long-running boom in the stock market.

That assumption turned the idea of a defined benefit pension plan on its head by guaranteeing employees benefits of a certain size when they retired and then also rewarding them for temporary gains in the retirement fund as if they had had their money at risk.

SB 400 was the brainchild of the California Public Employees Retirement System, known around the Capitol, and around the world, by the shorthand CalPERS. The details were negotiated behind closed doors by representatives of Gov. Gray Davis and the state employee labor unions. The agreement was added to the bill while it was in the Assembly, where, after a final round of amendments, it was quickly approved and sent to the Senate and then on to the governor for his signature.

Just in case you were feeling sorry for Gray Davis, here's a great example of how he got himself and his state in this mess. Posted by Orrin Judd at August 11, 2003 11:50 PM