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Feds Foil California Pension Reform

Wednesday August 31st, 2016   •   Posted by K. Lloyd Billingsley at 9:50am PDT   •  

60504746 - 3d illustration of "pension reform law" title on legal documentShortly after signing a contract with general manager Mike Wiley, Sacramento’s Sacramento Regional Transit “slipped into financial duress from which it has yet to recover,” wrote Tony Bizjak of the Sacramento Bee. “The agency has tapped reserve accounts in the last three years to balance its budget, leaving it with virtually no emergency funds this summer. RT raised rider fares 10 percent on Friday, making its buses some of the most expensive to ride in the country.” Though a bust as a manager, Regional Transit rewarded Wiley with a pension of $278,000, a full $48,000 more than his final salary of $230,000. The transit boss selected an option that will pay him $220,000 a year, still $10,000 above the federal pension maximum of $210,000. When Wiley departed, Regional Transit cut 20 administrative positions, but as Denny Walsh of the Sacramento Bee observes, the federal government is blocking state efforts at pension reform.

In 2012, California adopted a pension-reform measure that requires government employees to pay at least half the cost of their pensions. Under this measure, government employees have to work longer before retirement, and the state caps their pay for pension purposes. “At the time of its passage,” writes Walsh, “the statute was projected to save the state up to $60 billion over 30 years.” The federal Department of Labor, however, charges that California’s pension reform deprived Regional Transit employees of collective bargaining rights. Therefore, the federal government has cut off grants for millions of dollars. Federal labor officials only approved grants to transit agencies “that agreed to restore pre-reform-act pension benefits and bargaining rights.”

As Lawrence McQuillan explains in California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis, extravagant government pensions are depleting budgets and threatening vital public services. The federal government makes the task of pension reform more difficult.


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August 2016