Pension Reform Sham

money burning

A proposed pension reform initiative, the Public Employees Benefits Reform Act (PEBRA), should die an early death and never see the ballot box. PEBRA gives state workers pension guarantees superior to private sector workers. It does nothing to fix the current pension mess. PEBRA does little to reform the generous “3 at 50” retirement benefit that is bankrupting the state. It leaves the door open for taxpayers to pay state worker health and pensions costs in full. PEBRA isn’t the reform California needs – eliminating pension guarantees completely.

PEBRA gives state workers pension guarantees superior to private sector workers. PEBRA’s sponsor, Californians for Fiscal Responsibility (CFFR), base their proposal on “10 Commandments”, including:

* Pension benefits must be fair and adequate
* Pension benefits must be guaranteed

Yet, private sector workers get no pension guarantees. State workers get pensions (“defined benefits”), while private sector workers at best get 401(k) plans with uncertain benefits. It hardly seems “fair” to guarantee state workers “adequate” pensions superior to the private sector workers who pay for them. Yet, PEBRA amends the California Constitution to give state workers just such protections.

PEBRA does nothing to fix the current pension mess. California taxpayers are on the hook to pay for the $50 billion in losses that CALPERS took in the past fiscal year. This proposal does nothing to fix that.

PEBRA does little to reform the generous “3 at 50” retirement benefit that is bankrupting the state. The 3 at 50 benefit makes retirees eligible to retire at age 50, where they can collect retirement pay equal to 3 percent of their best year’s salary for each year worked (up to 90% percent of that salary). True, PEBRA raises retirement ages – to 55 for peace officers/fire fighters, 60 for public safety, “full retirement age” for others. True, it trades “best year’s salary” for highest annual average base wage over 5 consecutive years. However, PEBRA’s percentage limits are a sham, since the proposed limits (2.2% for peace officers/firefighters, 1.8% for public safety, 1.5% for others) are easily raised to 3% based on inflation. And, this applies to new workers only.

PEBRA leaves the door open for taxpayers to pay state worker health and pensions costs in full. It gives state agencies a Constitutional right to adjust the amount of employee contributions for these costs in any manner the agency finds appropriate. This would tie the Legislature’s hands against the very abuses that have created our fiscal crisis. This is the opposite of taxpayer protection.

The California state worker retirement system needs reform. But, this sham does more harm than good. Real reform means eliminating pension guarantees completely so that state workers are treated like the private sector workers who pay for them.


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