California Scales Back Pension Benefits

By: - September 13, 2012 12:00 am

A new law signed by California Governor Jerry Brown on Wednesday (September 12) will scale back retirement benefits for public employees in an effort to rein in the costs of the state’s woefully underfunded pension systems.

The law, which Brown touted as “the biggest rollback to public pension benefits in the history of California,” is expected to save billions of taxpayer dollars, though its supporters acknowledge it falls far short of addressing the bulk of the problem.

“Yes, it’s not everything. It’s not perfection,” Brown said, according to the Associated Press. “But in politics we don’t deal in perfection.”

The state estimates it has underfunded its two largest pension systems, the California Public Employees Retirement System and the California State Teachers’ Retirement System, by about $165 billion.

The new law is projected to lower the tab by about $78 billion over the next 30 years. It caps benefits, increases the retirement age by two years or more and ensures that workers will contribute at least 50 percent of their benefits.

“It was a meager reform that falls far short of solving California’s brutal pension math problem,” Dan Pellissier, president of the group California Pension Reform, told the Los Angeles Times.

Meanwhile, labor groups have likened the changes to an attack on public employees and on collective bargaining rights.

“This plan will make it harder to keep quality teachers in our classrooms and public safety officers on our streets,” said Dean Vogel, president of the California Teachers Association, following the law’s passage last month in the legislature.

California is just one of many states struggling to curb rising pension costs, a key problem fueling state budget crises. Legislatures nationwide are trying to address it.

On Wednesday, as Bloomberg reports, Ohio lawmakers passed a package of bills that would increase worker contributions to pension plans, increase the retirement age and adjust cost-of-living requirements.

In 2010, the state paid just two-thirds of the recommended contribution to its pension system, leaving it with a $58 billion funding gap, according to a review by the Pew Center on the States, Stateline’s parent organization. Meanwhile, it paid just 36 percent of the recommended contribution for employee health benefits.

In Illinois, where lawmakers have failed to address one of the nation’s worst pension problems, Governor Pat Quinn has launched a website aimed at generating grassroots support for change to the state’s pensions and Medicaid systems. 

“We need major reforms to fix Illinois’ broken pension systems. Delaying, deferring, or denying this challenge is not an option,” the site says in bold. “This isn’t about politics – no matter where you stand, Illinois must address this problem.”

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