Now That Drug Cost Increases Must Be Explained in California . . .

Could the same approach help schools and other public services?

Governor Jerry Brown just signed a bill requiring pharmaceutical companies in California to issue notifications at least 60 days in advance of a price increase that would be at least 16 percent over a two-year period and explain the reasons behind the increase. According to the San Francisco Chronicle, supporters of the legislation say it will discourage significant price increases.

I don’t know if the legislation will achieve its objective but if it does, maybe the same approach should be employed to reduce the significant increases in retirement costs crushing California schools and other public services. Those costs are rising as fast or faster than pharmaceutical prices. For example, retirement costs in the San Francisco Unified School District grew more than 100 percent over five years, taking money from classrooms and teacher salaries.

Sources: First Interim Reports, San Francisco Unified School District, FY2012 and FY 2017

And similar growth at the state level crowded out funding for courts, parks, the University of California, California State University and Social Services.

FY2010–11 Enacted Budget; FY2017–18 Governor’s Budget

The cause was — and remains — self serving behavior by pension fund board members and elected officials abetted by a deliberate lack of transparency that hides both the true size of liabilities when they are created (explained here) and the true costs of meeting those liabilities (explained here). Worse, the consequences of those costs are forced on to the most vulnerable members of our society (explained here).

It would be good for kids and other citizens if advance notification and explanation could help save schools and other public services from rapidly rising pension and other retirement costs.

NB: Truth and transparency would also be valuable for certain government employees at risk to default by certain governments, as explained here.

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