Citizen volunteer effort to contain a major statewide Fiscal Time Bomb

As a guest at today’s luncheon meeting of the South Bay Chapter of the LA County Lincoln Club of Los Angeles I had an opportunity to listen as termed out Assemblyman Keith Richman shared his concerns about a fiscal time bomb in our state better known as our retirement and health care pensions for public employees. It is coincidental that OC Supervisor John Moorlach held his press conference, on the same topic, an hour before this presentation.

It is also worth noting the number of elected and appointed South Bay officials who were in attendance to get a better understanding on this Initiative that is currently awaiting it’s “Title and Summary” from the office of the Secretary of State. You can find the text of this Initiative on the Attorney General’s web site which on June 21st assigned #07-0024 to this proposal.

The Initiative was submitted by the California Foundation for Responsible Responsibility. They have requested that the title read “The Public Employee Benefits Reform Act.” We will need to wait and see if that title is retained when it is officially accepted.
The three cosigners are O.C. Supervisor John Moorlach, former CA Republican Assemblyman Keith Richman and Kris Hunt, Executive Director, Contra Costa Taxpayers Association.

Lets begin by making it perfectly clear that this initiative affects only NEW State and local government officials with regard to their participation in defined benefit and retirement health care plans. Furthermore the initiative has several safety features to protect the recipients and the taxpayers.

Due to pension spiking we have government officials retiring at greater than 100 percent of their base salary. This is due to tacking on “overtime pay, bonus pay, severance pay, and payments for accrued but unused vacation and sick days (which ) shall be excluded from calculating the average annual base pay (for these new employees).

“Why do we need this initiative.” An easy question to answer. “The state of California’s own annual pension bill has increased from $160 million in 1999 to $2.7 billion this year.”

Keith told us that “the unfunded liabilities for teachers is around $25 billion” which is “actuarially unsound.” While John Moorlach has expressed his concerns for Orange County pension obligations we are not alone in facing this ticking time bomb. The Bay Area Grand Jury in Contra Costa County summed it up by saying “Mayday, Mayday, Mayday.” Hopefully the readers will understand that SOS message.

The Marin County Grand Jury stated that “it’s likely that a number of government agencies will go bankrupt” without a reduction in current service levels.

Adding the projections for retiree health care raises the shortfall to between $200 and $300 billion dollars.

In the LAUSD their retiree health care alone consumes 18 percent of their operating budget. When you add pensions that number grows to 27-28 percent simply to pay for these benefits. Keith said that there is a good chance that the LAUSD could go bankrupt.

Without getting into the nuts and bolts of their Initiative Keith estimated that voter approval of this plan could save $500 billion dollars over the next 30 years. That savings could be applied to wipe out the entire unfunded liability of both the pension and health care obligations of government officials.

If we keep our heads in the sand we are left with three choices:
1. Let the agency go bankrupt
2. reduce services
3. Raise taxes

Assemblyman Richman cautioned us to watch out for creative plans by government officials to address this red ink such as split property taxes or new local property taxes for services such as “public safety” when in reality said funds are required to back fill the current escalating obligation.

For more information on this Initiative simply go

Special thanks to Lincoln Club members Denny Schneider, Executive Director Peter Bylsma, President “Bob” Holmes and Arun Bhumitra, President of Arjay Telecommunications for opening their meeting for my attendance and participation.

About Larry Gilbert