When launching GFC in 2011 it was my hope that we would see meaningful pension reform by 2020, but we have failed to achieve that objective and the negative consequences for public services and taxpayers have been enormous. As evidence, just look at the four-fold explosion in annual pension spending by the Los Angeles Unified School District this year compared to ten years ago:
Pension spending will keep exploding. That’s because California’s public pension funds still have inadequate ratios of assets to liabilities despite more than $200 billion of pension contributions and a doubling of the stock market since 2013-14.
Pension reform is not the only thing I got wrong. I thought it would be even easier to terminate California’s unnecessary spending on other post-employment benefits (OPEB), especially after the creation of Obamacare and that program’s generous federal healthcare subsidies, but LAUSD alone is spending $365 million on OPEB this school year. Together, pensions and OPEB consume one of every six LAUSD dollars, leaving that much less for classrooms and salaries.
LAUSD is just one of dozens of examples of California’s massive diversion of tax revenues from public services to government employees, and larger diversions are on the way because Governor Newsom and the State Legislature bent over backwards in the last legislative session to award big salary increases, new retirement benefits, and new rights to government employees. When combined with California’s budget deficits — California is the rare state suffering deficits even though, as Mr. Newsom noted in last night’s debate with Governor DeSantis, the economy is “booming” — I expect government employee unions to press for another tax increase as they did in 2012, if not while Mr. Newsom is running for president then after any of the current candidates for governor take office in 2027, all of whom are running the standard California political play of loudly distracting voters with cultural issues while quietly doing the bidding of government employee unions.
Until there are more organizations like GFC protecting lawmakers who stand up to special interests in California, I expect public services to continue to decline and taxes to continue to rise.
