Digital News Report – Over the past decade, pension costs for public workers have increased 2,000% while state revenues during the same period increased just 24%. This year alone, more than $3 billion was diverted from programs that serve school children, the poor, and the elderly in order to fund public pensions.
And, things are getting worse. Stanford University’s well-respected Economic Policy Institute recently issued a study estimating that the state’s unfunded retirement system debt is close to a half-trillion dollars. To put that in perspective, half a trillion dollars would cost each California resident almost $13,600. What’s worse, that figure doesn’t include what the state owes for retiree health and dental care.
The ever-growing costs of public employee benefits are grossly adding to the insolvency of California and many municipal governments throughout the state. These costs are creating a quickly expanding financial sinkhole that taxpayers will be forced to fund when the day comes that California’s Public Employee Retirement System (CalPERS) investments cannot.
Some lawmakers are looking for ways to keep retiree benefits the way they stand now, but most of those solutions will cost taxpayers even more money. Senate Republicans, on the other hand, are proposing ways to cut costs, to reduce what newly-hired state workers get out of our pockets both today and in the future.
Senate Bill 919, a bill sponsored by Senate Republicans and supported by Governor Schwarzenegger, will require new state employees to work as many years as private sector workers before retiring. Currently, state workers retire about ten years before those in the private sector, thus requiring a great deal more in benefit payments from CalPERS.
SB 919 will also require new state employees to make a larger personal contribution to their retirement benefits and will base a state worker’s retirement benefits on the highest three years of wages earned to prevent last minute wage spiking.
Over the years, the Legislature has increased public worker benefits to incredibly high levels—lowering the age when workers can retire while increasing the benefits they can claim at no cost to them.
There is no question that pension and healthcare benefits guaranteed to state workers are creating unpredictable fiscal liabilities for both the state and local governments. But the solution is simple. California must reduce the benefits for newly-hired state workers in order to give the workers paying for state worker benefits a chance to pay for their own.
By: California Senator Bob Huff