Losing control of pensions

It goes back several decades ago when separate pensions were created for cops and firefighters. As Dan Walters reminds us, the benefits kicked in earlier and were more generous than those enjoyed by other civil servants. In due time everybody lobbied for those same benefits. From the Sacramento Bee:

For groups that had made it into the system, the big payoff came in 1999, when the Legislature and then-Gov. Gray Davis enacted a sweeping increase in public employees' pension benefits. It included a 50 percent increase in safety system pensions and a proviso that pensions would be calculated on an employee's highest earning year - which encouraged "pension spiking" through use of overtime pay and other gimmicks. The 1999 legislation applied only to state employees, but most cities and counties matched it, and the cumulative effect was to create liabilities that stretch into the hundreds of billions of dollars that the state and local systems can ill afford, especially as pension fund investments have faltered.

Given the budget emergencies faced by state and local governments, it's been suggested that a two-tier system be implemented in which new hires get less in benefits than current workers. But the idea has gotten nowhere in the union-friendly, Democratic- controlled legislature.

By the way, The New Yorker's James Surowiecki splashes cold water on the idea that California and Greece share the same bleak financial outlook.

The states have a fundamental advantage over euro-zone nations: they're part of a country, not an ill-defined union, so they can count on help from the federal government. Much of the assistance that the states get from Washington is close to automatic: in normal times, the government sends almost half a trillion dollars in aid (for everything from Medicaid to highways and education) directly to the states. And it can generally be counted on to step up its efforts in a crisis; last year's stimulus sent more than a hundred and fifty billion dollars to state and local governments.