As a matter of fact, if there was some real pension reform, there wouldn’t be any need for tax increases. California is drowning under the burden of employee pension costs. Even the modest reforms offered by Jerry Brown are making no progress in the
Democrat union controlled legislature. A couple of key parts of his proposal:
- Equal sharing of pension costs: Require all new and current employees to contribute at least 50 percent of their retirement costs, shifting the burden from public employers, some of whom currently make the entire contribution.
- Hybrid pension plan for future employees: Form a mandatory “hybrid” risk-sharing pension plan for new employees. New plan would include a reduced, guaranteed defined benefit, a defined contribution portion such as a 401(k)-style plan and Social Security.
- Cap for high-income public employees.
- Higher retirement age for future employees.
My personal belief is that this is a bait and switch. Brown knows that the legislature won’t pass these reforms or would slowly repeal them in the future; but he wants tax increases. His November ballot initiative calls for:
- Increase the state income tax levied on annual earnings over $250,000 for five years.
- Increase the state’s sales and use tax by 1/2 cent for four years.
- Allocate 89% of these temporary tax revenues to K-12 schools, and 11% to community colleges.
But of course this money will actually be funding teacher pension benefits not improving education. Meanwhile the state legislature is barely making a pretext of passing pension reforms proposed by their fellow Democrat, Governor Brown.
“It’s not as fast as I would like, but it’s complicated,” Senate President Pro Tem Darrell Steinberg, D-Sacramento, said this week during an appearance before the Sacramento Press Club.
He said Democrats have an obligation to deliver pension reform, particularly as they will ask voters in November to approve hikes to the income and sales taxes. But he also said they have “a different take” on parts of the governor’s plan.
A different take? Really? What take would that be? I’m not holding my breath for anything significant coming out of this legislature. Beating back tax increases is necessary to save California from even more businesses and wealthy individuals from leaving. Despite the Democrat lock on the state legislature, I firmly believe these tax increases will be defeated in November.