Ignoring its gathering storm.
California’s wine country fires delivered a vivid demonstration of the critical importance of governments being able to assemble armies of public safety workers when needed. Citizens expect their governments to provide public safety — but they also expect parks, animal shelters, transportation, road, sidewalk and tree maintenance, housing for the homeless, libraries and much more. What citizens don’t know is that some of their elected officials are systematically reducing the ability of their governments to both field adequate numbers of public safety personnel and fund other services. That’s because those officials refuse to acknowledge or address the explosive growth in pension and other retirement costs crushing their budgets.
Take Los Angeles. According to former First Deputy Mayor Austin Beutner, retirement costs now claim 20 percent of LA’s budget, up 4x in just a decade. Because public safety comes first, that means less for streets and sidewalks, libraries and parks, housing the homeless and other services. Yet despite retirement costs now consuming one-fifth of LA’s budget and the city’s most recent Annual Report disclosing that retirement spending jumped 18 percent in just one year, the press release accompanying the mayor’s signing of LA’s latest budget said nothing about retirement costs. Not a single word.
LA’s leaders are afraid to speak up.
LA’s retirement costs are going to crowd out more services, especially during the next recession. Beutner asks, “what happens when the 20 percent becomes 30 percent or more?” The answer: even greater cannibalization of public services, even more frequent requests for tax and fee increases just to preserve existing levels of service, and even greater division between citizens. Isn’t that worth acknowledging and addressing now?
This problem isn’t caused by Congress or the president. It is caused by self-serving public officials and if unaddressed is a threat to civil order. Last week I attended a conference at Harvard entitled Gathering Storm: The Risks of State Pension Underfunding. “Gathering Storm” of course is a reference to Churchill’s unheeded warnings about German rearmament. Presentations by scholars and speeches by Paul Volcker, Larry Summers and others left no doubt that pension costs are eroding civil services. Cities such as Los Angeles rank among the most troubled. Yet LA’s leadership is silent.
By not addressing the pension problem LA’s officials are setting the table for civil conflict. Retired public employees did not cause the pension problem but neither did the citizens, taxpayers and new or un-hired public employees suffering the consequences. By not acting, uncourageous elected officials are effectively throwing those innocent parties into a boxing ring to fight over declining dollars for jobs, benefits and services they prize and expect. They will unfairly blame each other when the real culprits are the elected officials who created the problem and those who neglected to act in time to defuse the consequences.
LA’s leadership is afraid to acknowledge or address exploding costs that threaten the city’s future because they care more about their own political futures. That’s because it’s potentially fatal for their political futures to highlight, much less rein in, spending that favors the largest recipient of local spending and the most powerful political force: government employee unions. But don’t blame the unions. They are only acting as pharmaceutical companies act when someone threatens their livelihoods. For both, government spending = revenues and like all businesses, they seek to maximize revenues. Instead blame (i) uncourageous officials who pander to those interests and (ii) political philanthropists who don’t sufficiently support courageous elected officials.
Civil society is at risk. Bold leadership is required.
Leadership failed to respond to the Gathering Storm. Likewise with LA’s leaders today. That’s why another conclusion reached at the Harvard conference is that pension problems only get solved by bold leadership. Examples include Rhode Island Governor Gina Raimondo, legislators in Pennsylvania and union officials in Arizona. We need to see such bold leadership in California.
The retirement cost problem in California was easy to solve a decade ago but self-serving officials blocked that path. Now they are limited to more difficult solutions that will cause even more pain. But the longer they wait the worse it will get. Political philanthropists and voters must support courageous elected officials and hold them accountable.
Bold leaders address problems before they become crises. LA’s elected officials should address retirement costs now.