We applaud Gov. Jerry Brown for his 12-point pension reform, but not too loudly. It features many obviously long-overdue fixes to the state's broken public workers' retirement system. But why have these blatantly obvious remedies taken so long?
We also wonder whether Mr. Brown, elected last year thanks to millions of dollars from public worker unions, may be going through the motions, aware these belated fixes could die in the Legislature, whose members also owe their jobs to union contributions. Is the governor superficially fulfilling a campaign promise, aware his union allies will strip his reforms of meaningful impact in deliberations?
Then there's this: If the governor is serious about pension reform for 2 million state and local government workers, why open negotiations with what already appear to be compromises?
The most substantive aspect of Mr. Brown's proposal would establish a "hybrid" risk-sharing pension to require a portion of government workers' retirement to be based on 401(k)-type investment plans common in the private sector, and a portion still guaranteed by taxpayers. Most public agencies guarantee workers defined-benefit payouts, unlike 401(k)s, where payouts are based on market returns. As Mr. Brown conceded, that means "the employer and ultimately the taxpayer ... bears all of the risk of investment losses."
Experts estimate California public pensions fall as much as $500 billion short of meeting projected obligations. That leaves taxpayers on the hook. Mr. Brown is suggesting some risk should be assumed by government employees. Some?
That seems to us a weak starting point for negotiations before the Legislature even takes up the issue, with an eye to putting an initiative on the ballot next year.
Why not begin negotiations proposing government workers assume the entire risk with 401(k)-type programs across the board, rather than a hybrid plan? Perhaps that would lead to a compromise that includes a hybrid plan.
Ultimately, even switching to 401(k)-type plans won't dent the state's immense unfunded liability problem. That's because Mr. Brown also begins the discussion by limiting changes to newly hired employees. Those savings won't be seen for years. It's the existing obligations to employees already on the payroll that are responsible for the $500 billion shortfall.