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Why Government Employee Pensions Will Be Taxpayers’ Main Squeeze

Friday April 27th, 2018   •   Posted by K. Lloyd Billingsley at 4:00am PDT   •  

Even Jerry Brown knows that government employee pensions have put California in a bad place. Prospects for reform recently took a hit when the Senate Public Employee Retirement Committee killed John Moorlach’s SB 1031 and 1032, which would have let local governments avoid CalPERS termination fees and limited cost-of-living hikes for future employees. The committee also killed Steve Glazer’s SB 1149, which would have allowed state workers to opt for a 401(K) instead of a pension plan. Glazer told the committee “we’re going off a fiscal cliff” but Connie Leyva rejected his reform saying, “I just think we need to do everything we can to get our young people into defined-benefit plans.” Those are the plans that have the state heading toward the fiscal cliff. 

CALmatters’ Dan Walters notes the vast unfunded liabilities and shows that CalPERS is trying to fix the shortfalls by ramping up mandatory “contributions” from public agencies, so “the squeeze is destined to get even tighter.” Cities now paying 50 cents into CalPERS for every dollar of police officers’ salaries be paying 75 or 80 cents within a few years. This will hit local governments and “their taxpayers even harder.” Cities will be hitting up taxpayers for sales-tax increases “but they won’t be telling those voters the truth about why new revenue is needed, fearing candor would spark a backlash.”

As a report from the Pew Charitable Trust notes, “many state retirement systems are on an unsustainable course.” In 2016, the state pension funds “reported a $1.4 trillion deficit—representing a $295 billion jump from 2015 and the 15th annual increase in pension debt since 2000. Overall, state plans disclosed assets of just $2.6 trillion to cover total pension liabilities of $4 trillion.”

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April 2018