Pensions Are The Missing Piece Of Budget Reform

 

Wednesday, Jul 15,2009, 2:48:21 PM   Click:

Governor Arnold Schwarzenegger calls for changes to retirement benefits in any agreement to resolve a deficit of $ 26 billion. And it should be stressed.

But unlike his ghost says that Medi-Cal and welfare programs are leaking money due to fraud and abuse, changes in pension rules would save money.

The savings are not immediate, because they apply only to new workers. That's why Democratic leaders say board should not be on the table now. It was one of the reasons that the Assembly Speaker Karen Bass boycotted discussions Monday. But the total savings of tens of billions of dollars in payments to avoid more than 30 years.

 The unfortunate truth is that the Democrat-controlled Legislature has been too quick to increase pension benefits and will resist reconsidering them unless it's forced to. Now is the time to do that.

Schwarzenegger wants to repeal a huge mistake of Gov. Gray Davis's administration. It happened in a flash in 1999, when, with but a minute's debate, the Legislature greatly expanded pension benefits based on the promise by CalPERS, the state's pension manager, that it wouldn't cost taxpayers a dime.

Now, because of stock market declines and rising costs of health care, retirement costs are already siphoning $3.3 billion from the state budget, just when California is facing substantial cuts in education and services to the poor. That cost is expected to rise steeply.

Schwarzenegger would roll back pensions for new state workers to what they were a decade ago, saving as much as $90 billion over 30 years. The retirement age for full benefits would go from 50 to 55. The benefit would not change: 3 percent of pay for every year worked, up to 90 percent maximum after 30 years for safety officers and 60 percent for other employees. Workers' share of contributions would increase to include a portion of pay that's now exempt.


Equally big savings would come from changes to health care for new retirees. The state will pay $1.4 billion for retiree health care this fiscal year and has socked away nothing toward $48 billion in future obligations for current employees.

Under Schwarzenegger's plan, new workers would have to work five years longer, to 25 years, before being eligible for the full benefit. They'd also have to contribute 15 percent of the health care premium, now fully covered by the state. The combined savings could be as much as $68 billion over 30 years.