Author: Marcia Fritz

Want to save schools? Fix pension systems

Originally published in the Sacramento Bee.

The recession deserves most – but not all – of the blame for the 1,200 layoff notices mailed to Sacramento area teachers this year.

You can also blame California’s public pension system, which drains at least $3 billion from state coffers that could be saved if prison guards, California Highway Patrol officers and Caltrans workers retired with benefits comparable in value to those provided by Cisco, Chevron and Safeway.

Proposition 98, which guarantees a level of school funding, would make sure schools get their share. Teachers’ jobs would be saved and program cuts would be less severe.

The California Foundation for Fiscal Responsibility released a study earlier this month showing that private and public employees earn comparable salaries for comparable jobs, but that state and local governments provide retirement benefits that are three times as generous as those provided by California’s largest companies.

This year, a 45-year-old state employee earning $60,000 annually will accumulate retirement benefits valued at $19,000. A comparably paid employee of a large private company receives retirement benefits worth less than $6,000.

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Retirement Costs Inflate State, Local Budgets

State and local government employees in California earn similar salaries as their counterparts in the private sector, but generous retirement benefits push total compensation costs significantly higher than what California’s largest companies spend, according to a study released today.

California’s largest employers typically spend less than one-third what state taxpayers spend on employee pensions and retiree health benefits. A state employee earning $60,000 annually will accumulate pension and retiree health benefits valued at $19,000 a year. A comparably paid employee of a large California company will receive retirement benefits worth less than $6,000.

California’s 2011-12 state budget includes $6 billion for the major state retirement plans. The study compares only the employers’ cost of benefits; it does not include the value of contributions employees make to their retirement plans.

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Public Asked to Help Reform Pensions

The California Foundation for Fiscal Responsibility posted two alternative public pension reform plans on our Web site, and we are inviting stakeholders and the public to help solve one of the most critical problems facing California.

Our lawmakers can’t fix California’s public pension crisis without the public’s help, and it’s got to be done right the first time. If it becomes necessary to put a constitutional amendment before voters, it should be drafted with input from stakeholders, experts and voters. CaliforniaPensionReform.com offers a forum to anyone with information or opinions that can contribute to a healthy debate.

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Comment on the Budget Pension Reform

The 2nd tier benefits for new hires is an excellent move in the right
direction, and we hope this action will be copied by local agencies
throughout the state.

However, based on a new study released today, fiscal conditions are so
dire that we must also ask for more pension concessions from current
workers to avoid cuts in services, layoffs, and/or higher taxes.

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Pension Reform Initiatives Would Save Billions

The California Foundation for Fiscal Responsibility filed with the Attorney General’s office two pension and retiree health care initiatives that would save state and local government agencies hundreds of billions of dollars in retiree benefit costs. Either measure would end the expensive abuses which have increased costs and run up huge deficits for public defined benefit pension plans.

The initiatives are identical except for the voter requirement that allows agencies to increase benefits for new workers. We plan to poll voters to determine which version they prefer.

With more than $200 billion in retirement debts and skyrocketing costs crowding out the investments we need in education, health care, transportation, public safety and the environment, it is time for a statewide solution to our retirement benefits crisis. By requiring all new non-safety public employees at all levels of government to work until their Social Security retirement age for full benefits and ending the politicians’ raids and abuses of public pension funds, California public agencies can offer secure retirement benefits that are fair for taxpayers and their employees.

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Fix the Public Sector Retirement System!

For several years I’ve warned that we can’t afford pension enhancements that have been granted to California’s state and local government workers since 1999. That’s when the Legislature passed SB 400 to increase benefits and lower retirement ages for state workers and permitted local agencies to do the same. Cities, counties, water districts, fire districts – all — have felt pressure to ramp up benefits to keep employees from bolting to other districts.

To bring sanity back to government employee compensation, the California Foundation for Fiscal Responsibility proposes uniform retirement benefits for NEW workers that closely resemble defined benefits earned by federal workers. Not only would uniform benefits stop the bidding wars, we estimate California’s governments will save at least $500 billion in pension costs over the next 30 years. We felt that would be more than enough to keep budgets balanced.

We were wrong.

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