Is the Long-Looming Pension Crisis Already Here?
David Crane, a lecturer at Stanford and a former adviser to Gov. Arnold Schwarzenegger, is the bringer of bad news. For more than a decade, Mr. Crane, a San Francisco Democrat and former investment banker, has been forecasting a disaster in California’s pension system. He was removed from the board of directors that oversees benefits paid to California’s teachers after repeatedly warning that the fund’s investment assumptions were too rosy, and since then has continued to scream about a coming financial reckoning.
Today, in addition to teaching at Stanford, Mr. Crane is the president of Govern for California, a network of political donors whose members include the former mayor of Los Angeles, Richard Riordan, and the Oakland A’s owner John Fisher, and supports candidates from both parties – so long as they are willing to tackle important but politically unpopular issues like pension and education reform.
Below is a condensed interview with Mr. Crane:
Who/what is Govern for California?
It’s a network of about 300 donors and growing, and they are Democrats, Republicans and Independents. The legislature is a coequal branch of government and governors can’t do anything without them. Generally speaking, the only people who know the names of California state legislators are people who feed at the trough or benefit from new legislation. The people who get screwed are everyone else in California.
The headlines make it seem as if the pension problem is always coming and never here. You say it’s already here. Explain.
State revenues have gone up about 30 percent over the last decade, but state spending on virtually everything other than retirement costs and medical spending – like universities, courts, parks and welfare – is flat to down. That kind of stuff happens because the money is going out the door to something else, and you ain’t seen nothing yet. The way the math works, the problem doubles every seven years.
Oakland schools recently cut their budget $15 million in the ninth year of a bull market and after a 30 percent state tax increase. People are teaching kids but can’t afford to live in their city. That to me is a crisis. School systems can’t afford to hire specialists. That to me is a crisis.
What’s your suggestion for fixing it?
The easy way was to fix it 13 years ago. Now the state is going to have to cut benefits for people who did nothing wrong, and don’t even have pensions that are that high. Most people will tell you that the cuts are draconian, but it’s not more draconian than what has already happened to taxpayers, college students and young teachers who aren’t getting jobs – or aren’t getting salary increases if they can get jobs.
Tell me something optimistic.
This problem will be incredibly painful, but I really believe that the California legislature is going to solve it.
California Online
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