The lesson of the fiasco in Bell, California

The silver lining of the Bell fiasco is that it has awakened taxpayers to the magnitude of the public employee compensation problem (recent studies suggest the state has $500 billion in unfunded pension liabilities), and hopefully shamed some elected officials into implementing some real transparency reforms.

The excessive pay and benefits received by many government workers will not be solved, however, by merely increasing transparency of compensation data or tinkering around the edges of the pension system by offering slightly less generous benefits for new employees or requiring them to work a couple of more years before being eligible for retirement. The entire system needs to be overhauled. New employees should be switched to a 401(k)-style defined-contribution system, with pay and benefits comparable to those in the private sector. Only by seriously addressing excessive public employee pay and benefits can state and local governments in California ever rein in their enormous and unsustainable bureaucracies and return to any semblance of fiscal responsibility.