The Coming Impact of Pension Payments on California’s Cities, and How Reforms Could Happen

AUDIO: Part One – Employer contributions to pension systems for state/local workers are set to double in the next six years, best case. Ways agencies are trying to increase taxes and cut services to find the money – 10 minutes on 1440 AM KUHL Santa Barbara – Ed Ring on the Andy Caldwell Show.

AUDIO: Part Two – A discussion of how California’s pension crisis began, what potential reforms could make pensions financially sustainable, and the organizations that could successfully push these reforms – 10 minutes on 1440 AM KUHL Santa Barbara – Ed Ring on the Andy Caldwell Show.

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2 comments to The Coming Impact of Pension Payments on California’s Cities, and How Reforms Could Happen

  • Stephen Douglas

    When Mr. Ring says the pension will go from 60% to 90%, (with 30 years service),that —only— applies to those who actually retire at age 50. (Which would require beginning career at age 20, very unusual.)

    The average age of CHP retires is 53-54. Slightly higher for local police.
    (Partly because the average age of trainees in the CHP Academy is mid-to-late twenties.)

    The 2% formula he referred to increased to 2.7% at 55, both formulas had a 90% max. If that employee retired at age 55 with 30 years service, his pension would be 81%, not 60% Even under the previous formula, many officers retired with 90%, So SB400 gave them no pension increase at all, nada. And not retroactive.

    To be sure, many officers did get pension increases and/or were able to retire earlier, but to imply that all officers got a “fifty percent pension increase, retroactively” is just not true. And note this increase was almost exclusively for safety workers, not miscellaneous.

  • Thank you for your comment. None of this information was offered with the intention of misleading anyone. You’re right that there were differences between public safety and miscellaneous pensions. You’re right that relatively few public employees retire at age fifty.

    Where we disagree however is on the fundamental point made, which is that these increases represented 50% increase to the value of pension benefits. When you consider how many public employees nearing retirement got in exchange for just a few more years of work, 50% isn’t nearly enough to describe the return in that context. Similarly, if you consider the impact this retroactive increase to benefits had on the required normal contribution and the size of the overall pension systems’ liability, it was, again, well in excess of 50%. These impacts were masked by complex accounting practices and by the fact that the internet bubble had put the systems into a surplus position at the time the enhancements began to be granted.

    Most analysts agree the primary cause of the problems California’s public employee pension systems face today is the ill-considered decision to enhance benefits, retroactively, starting in 1999. This is not to say there aren’t plenty of other contributing factors. But I believe that if pension systems had not enhanced their benefits back then, they would be in sustainable financial territory today.

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