Tuesday, November 29, 2011

California:  Pension Tension

Jerry Brown has rolled out his long-awaited proposal to reform publicly financed pensions for government workers, drawing protests from Republicans and Democrats alike.
As a policy matter, paying for pensions, at least in the short term, is a relatively modest problem given the massive scale of the state's fiscal woes; retirement costs account for just 3% of Sacramento's overall budget, and the average public pension is only about $26,000 a year, despite news stories highlighting a relatively small number of outrageous abuses. As a long-term issue, however, it is far more dire; one study estimates that state and local governments face an unfunded future pension liability of as much as $500 billion in California, and retirement costs for cities, counties, and special districts, which administer thousands of plans linked to the state's, are proportionately of much greater magnitude.
... the governor proposed major reforms to restructure the system, which he said would save taxpayers more than $10 billion over the next 30 years. Key elements include:

• Raising the retirement age for most new employees to 67; public workers between 50 and 62 currently can retire with full benefits, depending on the type of work they do.

• Splitting contributions to the system 50-50 between workers and government employers; employees typically now pay a smaller share, and some pay nothing.

• Adopting a hybrid system that would require taxpayers to fund a smaller portion of pensions for new employees, with more financed by private-sector—style 401(k) investment programs.

For more, see Pension Tension by Jerry Roberts, November 3, 2011 at Santa Barbara Independent.

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