What California doesn’t need: Another government

Published 12:01 am Friday, March 4, 2011

In economic downturns, people lose their jobs. It hurts, and at the beginning of a recession it’s usually us, the ordinary folks, who get the pink slips. But the deeper and more persistent a downturn is, the more we look to hold people responsible, even high profile people.

No job has a highe

r profile than the president’s, and we tend to be protective of them, blaming aides and administration officials when possible. Yet, when our economy began its sickening descent after the 1929 stock market crash, voters eventually blamed President Herbert Hoover. In the end, he lost his job in the Depression.

Although he would live for another three decades and enjoy a remarkably productive life, the scorn and vitriolic criticism heaped on Hoover at the time never really wore off. In a process encouraged by his political rivals, his name became linked in the public’s mind to ineffectiveness and failure. Hooverville, for example, became the popular term for an encampment of the jobless.

Before the stock market crash and the recession, of course, everything that Hoover touched had been a success, which was why he was elected. The White House website describes his record this way: “… Herbert Clark Hoover brought to the presidency an unparalleled reputation for public service as an engineer, administrator, and humanitarian.”

He brought that talent and devotion to public service to a job that President Harry Truman asked him to take on in 1949: Take a look at how the federal government was organized and figure out how to fix it.

In Congress’s hands, naturally, the straightforward, “take a look” idea was transformed into a large, unwieldy, bipartisan, multi-member commission. But that kind of organizational mess was no match for Hoover. Unlike almost all other congressional commissions before or since, the Hoover Commission did its work so well that it actually changed things, and for the better. Out of the 273 recommendations made by the Hoover Commission, more than 70 percent were implemented, which has to be one of those records that will never be equaled.

The memory of the Hoover Commission’s effectiveness remained so strong that in 1962, when the state of California decided that it needed an independent government agency to investigate its operations and recommend changes, it quickly became known as the “Little Hoover Commission” and that remains its operating name to this day.

Just over a week ago, on Feb. 24, the Little Hoover Commission issued its report on California’s pension systems covering state and local government workers. It is a document so sobering that if it had been issued just a few weeks earlier, Charlie Sheen might still be working.

California’s public pension systems are so far underwater that financing their obligations would be unimaginable, even in the most prosperous times. The funding of California’s public sector pension benefits casts a dark shadow over life in that state. The commission’s report notes that financial managers at every level, from local school boards to the state capital, “… face the prospect of increasing required contributions into their pension funds by 40 to 80 percent of their payroll costs for decades to come. It is practically enough money to fund a second government, and it will — a retired government work force.”

That is just what we need in our country: adding a second government we can’t afford to the government we already can’t afford.

In keeping with the tradition of its namesake, the commission’s report offers realistic solutions for improving the existing system, each based on setting uniform standards for the state’s defined-benefit public employee plans.

The first of these standards would set a maximum salary of $80,000 to $90,000 for pension benefit calculations. This would eliminate the most shameful practice of allowing workers to load up their last working year or so with premium-pay overtime and then using that year’s larded-up earnings as a base for their pension.

The commission also recommends adopting what it calls a hybrid pension model that combines a smaller defined-benefit pension plan with an employer-matched defined-contribution system along the lines of today’s 401k plans.

One of the most important points made in the report is that it is too late to solve the problem by adjusting pension benefits for newly hired employees. That ship has sailed. As much as we would like to solve this problem with baby steps, we have to confront the financial reality of a pension bill we cannot pay.

The report, by itself, is probably not enough to alter the deeply embossed public image of Herbert Hoover. But by honoring his tradition of tackling tough problems and getting the job done, the Little Hoover Commission has both honored his name and done all of us a favor.

James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.