Wednesday, June 09, 2010


Recently State Senator Dennis Hollingsworth joined with Gov. Schwarzenegger in penning an article that calls for significant reform of California’s public employee pension system. That system, according to a group of Stanford University researchers, puts the state’s unfunded pension liabilities at a staggering 500 billion dollars.

Hollingsworth’s SB 919 is the specific legislation designed to transform journalistic rhetoric into government policy. The bill's provisions only apply to new hires. Among other features, it puts the retirement eligibility age for non-public safety employees at 65 and changes the system for calculating benefits for all employees from the highest single year’s pay to an average of the highest three years.

Other measures reduce the state’s contribution to retiree health care costs and add five years to the length of service one needs to be fully vested for health care benefits.

Today it isn’t unusual for public employees to retire at age 50 with annual pensions that amount to 90 percent of their annual pay. In some cases, by taking advantage of provisions that allow employees to “spike” their salary, yearly pensions that exceed an employee’s largest salary are possible.

A fire chief in Contra Costa County provided the poster-boy example of the “spiking” that’s common at both the state and local level. In this case sick leave, almost two years of administrative leave, an auto allowance, standby pay and additional management pay were all part of the formula that placed the 51-year-old retiree’s annual benefit at $284,000--$63,000 more than his final year’s salary.

Assuming the ex-chief lives another 30 years, his total pension payout will amount to over 8.5 million dollars—not counting adjustments for inflation.

Predictably, public employee unions that have a stranglehold on the large Democrat majority in Sacramento oppose Hollingsworth’s proposed pension cutbacks. One political observer noted that there’s no chance the legislature will embrace even this modest new-hire bill.

Representatives of the supposedly neutral California Public Employees’ Retirement System (CalPERS) testified against SB 919 and put a happy face on debt obligations that currently cost the state over 3 billion dollars a year.

On the other hand, Schwarzenegger’s chief pension advisor, David Crane, reminded the committee of the CalPERS plan in 1999 that retroactively increased pensions and put California taxpayers on the hook to pay vast sums if the Dow stock average didn’t hit 25,000 by 2009 and 28 million by 2099!

Today’s elections will mean little if nothing is done to break the vicious circle whereby public employee unions buy politicians who then feed the beast that created them.

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