Now That Drug Cost Increases Must Be Explained in California . . .

Could the same approach help schools and other public services?

Governor Jerry Brown just signed a bill requiring pharmaceutical companies in California to issue notifications at least 60 days in advance of a price increase that would be at least 16 percent over a two-year period and explain the reasons behind the increase. According to the San Francisco Chronicle, supporters of the legislation say it will discourage significant price increases.

I don’t know if the legislation will achieve its objective but if it does, perhaps the same approach should be employed to reduce the significant increases in retirement costs crushing California schools and other public services. Those costs are rising as fast or faster than pharmaceutical prices. For example, retirement costs in the San Francisco Unified School District grew more than 100 percent over five years, taking millions from classrooms and teacher salaries.

Sources: First Interim Reports, San Francisco Unified School District, FY2012 and FY 2017

And similar growth at the state level is crowding out funding for courts, parks, the University of California, California State University and Social Services.

FY2010–11 Enacted Budget; FY2017–18 Governor’s Budget

The cause was — and remains — self serving behavior by pension fund board members and elected officials abetted by a lack of transparency that hides the true size of liabilities (explained here) and the true costs of meeting those liabilities (explained here). Worse, the consequences of those costs are forced on to the most vulnerable members of our society (explained here).

It would be good for kids and other citizens if advance notification and truthful explanation could help save schools and other public services from rapidly rising pension and other retirement costs. Notification and truthful transparency would also be valuable for government employees at risk to default by certain governments, as explained here.