Dear Legislators,

Soon you will be addressing the budget. Three suggestions:

  1. Permit no cuts, layoffs or borrowings before retirement spending is trimmed. School districts, UC, CSU, community colleges and the state are diverting $25 billion per year to retirement spending that should be reduced before services are cut, employees are laid off, or funds borrowed.

  1. In the event of layoffs, protect earlier-in-career teachers from discrimination. Earlier-in-career teachers need protection from disproportionate layoffs under California’s discriminatory “last-in, first-out” layoffs law.
  2. If borrowing is undertaken, do so transparently and at the lowest cost. Deferring contributions to pension funds should not be an option, because that’s no different than borrowing at a 7 percent rate. You have more transparent and less expensive options.

Over the last eight budget years, no General Fund expenditure grew faster than retirement spending. That’s because of a retroactive pension increase granted in 1999 and a self-interested decision by state pension funds in 2005 to reject recommendations to boost pension contributions at that time. As a result, retirement spending exploded despite an economic and stock market recovery:

Because retirement spending grew faster than revenues (which were boosted by a tax increase enacted in 2012 and renewed in 2016), funding for most discretionary programs grew slower than revenues. Absent reform, retirement spending will continue to grow faster than revenues even after the COVID recession has ended.

Without voter approval, the state is diverting $25 billion per year from schools, colleges, universities and state services to retired employees. Local governments and transit agencies are diverting billions more. Retired government employees must start sharing in pain that has already afflicted active employees, residents and taxpayers.