The total spending increase needed to get CalSTRS, brought low by mismanagement, back to full funding may be the biggest-dollar scenarios ever presented to a California legislative committee. Legislators were told last week an additional $181.7 billion would be needed for full funding in 20 years. If payments are spread out to ease the budget bite, the additional amount needed to reach full funding in 60 years is a staggering $618 billion.
OPINION: Public employees have shown they are willing to do their part to help balance government budgets. We may not have liked the pension system overhaul Governor Brown signed in 2012, but once it became law our union leaders helped to implement the changes, which will amount to a reduction of more than $77 billion to public workers’ retirement and health care benefits.
The Vallejo city council last week voted to close a $5.2 million gap in the current budget, showing no alarm that in a five-year forecast the gap reopens, mainly driven by rising pension costs. Moody’s, a Wall Street credit rating agency, said earlier that Vallejo and two California cities currently in bankruptcy, Stockton and San Bernardino, risk returning to insolvency without pension relief.
Backers of an initiative that would give new Ventura County employees a 401(k)-style plan, rather than a pension, sometimes mention a lawsuit filed last fall by a former sheriff. Bob Brooks, whose salary as Ventura County sheriff was $227,600 a year when he retired in January 2011, received an annual pension of $283,000. He filed a suit last September seeking an additional pension of $75,000 under a supplemental plan.
To cover the cost of retirees living longer, the CalPERS board next month is expected to approve the third rate hike in the last two years, phasing in the increase to soften the blow on state and local governments. The new rate hike would not begin until fiscal 2016-17 to allow employers time to plan after receiving rate projections next year.
But a series of state court rulings are widely believed to mean that the pension offered current workers on the date of hire becomes a vested right, protected by contract law, that can only be cut if offset by a new benefit of comparable value. Santa Clara County Superior Court Judge Patricia Lucas said in her ruling the question before her court is “one of law, not of policy,” referring to a state Supreme Court response to city and county briefs on an Orange County attempt to cut retirement costs.
The rapidly growing cost of state worker retiree health care, a more generous benefit than received by active state workers, soon could be taking a bigger bite out of the state general fund than pensions. As if trading places, a new forecast expects the annual general fund payment for state worker retiree health care, now $500 million less than the payment for pensions, to be $500 million more than the pension payment in six years.
CalPERS' headquarters in Sacramento. (Photo: Coolcaesar/en.wikipedia)A new study shows CalPERS members are living longer. It’s the first step in a review of workforce changes and investment polices that could lead to higher contribution rates for employers and possibly employees. (Photo: coolcaesar, en.wikipedia)
CalPERS' headquarters in Sacramento. (Photo: Coolcaesar/en.wikipedia)A new CalPERS projection shows employer rates for the largest group of state workers increasing 27 percent over the next six years — but the focus is on the risk of how much things can change.
The Metrolink station in Buena ParkGov. Brown’s signing of legislation to exempt some 20,000 California transit workers from public pension changes could mean at least $1.6 billion — and perhaps more than $4 billion — in federal funds for California.