California lawmakers are boosting pension benefits as its economy teeters

As Mark Twain wrote, "History doesn't repeat itself, but it often rhymes." Lately, I've been hearing a recurring rhythm—and getting the blues—as the legislature is about to repeat a grievous mistake. The issue involves public-employee pensions, as the legislature has advanced two bills that would exacerbate the state's pension problems in much the way it did 27 years ago. First the requisite history lesson. In 1999, the Legislature passed Senate Bill 400. The stock market was booming, and the nation's largest pension fund, the California Public Employees' Retirement System, was awash in cash. "Investment earnings had averaged 13.5 percent for a decade, soaring in the two prior years to 20 percent," per Calpensions. The state's pension plans, it noted, were funded at 100 percent to 139 percent. In private 401(k) plans, employees contribute a portion of their income to investment accounts. When the market soars, the employee's account goes up and vice versa. The employee owns what's in the account. With "defined benefit" accounts, the pension fund invests the contributions. Employees receive a guaranteed pension based on a formula. If stocks soar, investment funds are in good shape to pay what's promised. If they tank, it creates shortfalls that are