Pension Deal Good First Step
The negotiated change in the pensions for four public employee unions announced by Governor Arnold Schwarzenegger is a good first step in fixing a major component of California’s fiscal problems.
The deal negotiated by the governor and four unions representing 23,000 workers is like slowing a portion of that Gulf oil leak, but not stopping the flow all together. There are hundreds of thousand of more public workers who must agree to reforms. Other unions falling in line would stem the flow of red ink leaking from the budget.
The proposal, which still needs rank-and-file member approval, increases payments made by current union members toward their retirement from 5% to 10%; determines a worker’s pension benefit based on the three highest salary years instead of just one; and requires retirement age to increase by five years for new hires.
Wimpy Pension Deal
Cross posted at CalWatchdog.com
We got the heads up earlier that the governor had negotiated a
blockbuster pension deal with four public employee unions, but now we
see that this is no sort of deal. As the Bee reported, "Newly hired patrol officers and firefighters would come in under a
new pension formula that would allow them to retire at age 55 with 3
percent of the average of their highest three years of pay multiplied
by their years of service up to 90 percent of that average wage.
Current employees can retire at age 50. New and existing employees in
all four groups would increase their pension contributions to the
California Public Employees’ Retirement System from the current 5
percent of their pay to 10 percent."
These are minor concessions that will have absolutely no effect on the
coming pension tsunami for retired public employees, many of whom are
members of the $100,000 Pension Club.
The Role of the Investment Return Assumption
As
California’s public pension funds consider changes to their investment return
assumptions, it’s helpful to review that assumption’s role and whom it impacts.
The
investment return assumption determines who pays for pension costs. This
is because it determines how much money must be set aside (contributed) by the
generation that got the benefit of the services to which the pension relates.
If the right amount of money is set aside when the promise is made, then the
generation that got the benefit of the services to which the pension relates
rightly bears the full cost, and only that cost. If too little is set aside, a
future generation has to cover some of the cost even though it did not get the
benefit of the employee’s services. If too much is set aside, the generation
that got the benefit of the services bears too much of the cost.
The Texas Oil Company’s Threat to California’s Solar Industry
Hardly a week goes by these days without the announcement of a new job-creating solar plant sprouting up in California.
Today’s headlines were about plans for a 500 MW plant in King’s County
— one of the areas hardest hit by the recession. Several
California-based solar companies are heavily involved with the project, which will create thousands of high-wage jobs during construction.
This solar
facility — which will ultimately provide enough electricity to power
100,000 households — joins many more that have been put in place, are
under construction, or are on the drawing boards in the Golden State.
All told, more than 10,000 projects are in the works in the state —
far eclipsing that of any of our state’s rivals. (For a complete list,
visit www.californiasolarstatistics.