Solution for public-sector pension problems

As most readers probably know by now, California and many other states have a huge problem with unfunded public pension liabilities: Enabled by greedy, ignorant or merely vote-seeking legislators, public-employees unions were able to negotiate ever-richer pensions, paid for by future taxpayers.

But predictably, the same legislators that approved the extravagant pensions didn't want to 'fess up to what should have been the true cost of funding those *today,* since that would limit what they could spend on other projects (and would also have revealed the legislators as being in the pocket of the unions).

Critics and math-savvy analysts repeatedly suggested public employees be required to contribute more to their own pensions, but the powerful unions ensured that this never happened.

As a result, unfunded public pension obligations in California alone are something like $248 Billion. And growing every day.

The state government is already running a multi-billion-dollar deficit, and no one thinks the legislature can close that deficit by raising taxes. So it doesn't seem possible that the pension shortfall could be funded from any feasible combination of tax increases or spending cuts.

When you have claimants demanding that the government pay them X, but the system has, say, one-half of X, what do you do? Time to look "outside the box" for a solution. It'll hurt, but what are the other choices? (We'll get to one of those in a moment.)

First, cut all public-employee pensions--current and future--by a percentage that started at, say, five percent on the lowest pensions and rose to 40 percent on pensions of $70,000 per year or more. That cut would apply to legislators, former governors and all university poobahs as well.

Second: Cap all public pensions at, say, $100,000 per year. Any retiree should be able to live on that amount, even if it means only being able to buy a new Mercedes ever four years instead of every year.

Third: The pension cap shall apply to the total of all pensions paid to an individual by all government entities in the state. In other words, no double-dipping allowed.

"Wait, you can't do that! You're breaking a legal contract!"

Actually, a legal principle called "force majeure" recognizes that contracts can be voided in the event of war, natural disasters, riots and other catastrophic events. No one imagined the state would completely run out of money, but....

Obviously, cutting pensions as outlined above will bite a lot of people who did nothing wrong. But it'll take only a small bite from low-level workers. It's also true that the fat cats at the top of the pyramid will take a much bigger hit--but at the same time, they've had years of huge salaries to build up assets that will help them cushion the bite.

Plus, they're all liberal Democrats, who feel everyone should give up their own disposable income (through paying more taxes) to support the public-employee's salary or retirement, so they should be able to appreciate the principle of reversing the direction of the cut.

That is, "You already agreed with the principle, senator, so how can you possibly complain when the exact same principle cuts against your own economic interest?"

But of course, they'll fight even the most minor cut tooth and nail. As anyone would. Which leads us to the "other option" I mentioned earlier:

If public employees succeed in blocking a reduction of their pension benefits--current and future--to a total that's within the state's ability to pay, then at some point the whole state goes bankrupt. Then who will pay the pensions?

You'd think that public employees in California would rather have a slightly smaller pension (at least on the low end) that the state could afford to pay, instead of 100 percent of no check at all.

Force majeure.