In Europe, several national governments are confiscating or attempting to confiscate public and even private pensions to shore up their budget deficits. Europeans believed their pensions were safe. That was before their governments' overspending and revenue shortfalls combined to make the unthinkable into something imminent.
In California, the government's fiscal condition hasn't deteriorated to the point of seizing pension benefits. But an early indicator that things are moving in that direction has arisen in the University of California system.
According to 36 top UC executives, UC is reneging on a 1999 promise that, once the IRS lifted its cap, UC would calculate retirement pay on a percentage of entire salaries, rather than on only the first $245,000. The IRS removed the limit in 2007, but the university hasn't changed its calculation. That's because increased benefits for about 200 eligible employees would cost an additional $5.5 million a year, and another $51 million to make the changes retroactive to 2007.
A UC official earning $400,000 per year would get an annual $183,750 pension under the cap, but $300,000 without it. The protesting employees were paid salaries in 2009 of $174,000 to $756,000.
The dispute comes as the university's retiree benefit obligations already are $21 billion more than what's in its retirement fund, and as further student fee increases are being considered.
"These executives seem very out of touch at a time when the state is contemplating billions of dollars in reductions that will affect people who are less-advantaged," Gov. Jerry Brown said days before taking office.
In California, public pensions generally have first claim on tax money. That may mean current workers and programs will be sacrificed to pay retired employees. Or else, promises could be broken, such as may be occurring at UC.
It's noteworthy that 822 other UC faculty members signed a petition against increased pensions. They sided with Assembly Speaker John Perez, D-Los Angeles, who characterized the top-earners' demands as tone-deaf and greedy.
We're sorry a sentiment of restraint took so long to emerge at UC. The controversy is another reminder that public pensions must be restrained. A 401(k)-type private investment system under employees' control works in the private sector and could avoid catastrophic burdens for taxpayers in developing reasonable pension plans for those in the public sector.