Fixing California's public pension crisis
As the June 28 deadline approaches for the Legislature to place a measure on the November ballot, taxpayers should know what's at stake and what's necessary to fix the state's pension crisis.
As the June 28 deadline approaches for the Legislature to place a pension reform measure on the November ballot, taxpayers should know what's at stake and what's necessary to fix California's pension crisis.
For all the angst in the debate on this issue, the fix is easier than you might think. The Legislature should ask the voters to amend the state Constitution this fall, enacting once and for all the three most important features of Gov. Jerry Brown's 12-point pension reform plan: requiring all public employees to pay half the cost of their retirement plans; requiring future employees to share the risks associated with their plans with taxpayers; and tying state and local retirement ages to federal retirement ages.
According to Stanford's Institute for Economic Policy Research, even if it's assumed that pension fund investments perform reasonably well, the unfunded liabilities of California's largest state and local pension systems stand at about $500 billion. One intrepid reporter did the math: that amount of pension debt amounts to $30,500 for every household in the state.
Largely because of that debt, pension costs are the fastest-growing expenditure for city and county governments and will consume 17% of city budgets this year. Again according to Stanford, pension costs grew 11.4% a year between 1999 and 2010, twice the spending growth rate for education, public safety, parks, health and sanitation. While other services are cut, pension costs go nowhere but up.
Public employee unions are right to complain when their members are lumped together as pension gluttons. Research conducted last year showed that teachers earn retirement benefits that are only marginally more generous than those offered by California's largest companies, and they seem stingy when you consider that state prison guards and California Highway Patrol officers can retire seven years earlier than teachers with benefits that are 77% more valuable.
A study commissioned by the California Foundation for Fiscal Responsibility found that state public safety employees collect more in benefits than FBI agents. A 53-year-old CHP officer, for example, with 26 years service and an annual salary of $140,000 is entitled to retirement benefits valued at $2.2 million. An FBI agent's benefits are valued at $1.6 million.