Pension Issue 1: The Pension Sustainability Risk Falling on Future Generations

Risks of underfunding current benefits could result in the loss of future jobs and government services and need for massive tax increases.

LA Times Opinion:California’s $500-billion pension time bomb

That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

Pension Issue 2: Perceived unfairness or unnecessarily excessive perks

On January 26, 2012 Democratic Governor Edmund G. Brown Jr. asked Los Angeles business leaders to stand with him on two major priorities for 2012: passing his balanced budget plan and persuading the legislature to enact his 12-point pension reform proposal.

“The numbers just don’t add up,” said Governor Brown of the public pension system. “Benefits, contributions and the age of retirement don’t reflect today’s realities, putting taxpayers on the hook for huge costs in the future. The cracks are showing and this dam will burst unless the legislature gets serious and takes urgent and decisive action.”

Governor Brown’s pension reform plan, introduced in October 2011, will apply to all California state, local, school and other public employers, new public employees and current employees as legally permissible. The plan’s 12 points are:

1. Equal sharing of pension costs between all employees and employers
2. Establish a “hybrid” risk-sharing pension plan
3. Increase retirement ages
4. Require three-year final compensation to stop pension spiking
5. Calculate benefits based on regular, recurring pay
6. Limit post-retirement employment
7. End felons’ pension benefits
8. Prohibit retroactive pension increases
9. Prohibit pension holidays
10. Prohibit purchases of service credit
11. Increase pension board independence and expertise
12. Reduce retiree health care costs

For full details of Governor Brown’s pension reform plan, click here.

From the LA Times coverage of Governor Brown’s request:

Reporting from Sacramento—Gilbert Robles retired as a state parole agent at age 53, able to collect a $101,195 annual pension — 94% of his final salary. Last year, six months after he retired, the Arcadia resident accepted a political appointment with the same agency that pays an additional six figures.

Scott Hallabrin took retirement as the top attorney for the state’s ethics agency on June 29, 2009. The next day, he went back to the same post, as he prepared to watch his pension checks roll in on top of a salary.

Los Angeles school administrator Norman Isaacs got a 35% raise in 2006, the year before he filed for his public pension. The increase sharply boosted his retirement benefits.

Robles, Hallabrin and Isaacs acted within their rights under California’s pension rules, which the Legislature’s independent budget analyst recently described as “among the most generous in the country.” That generosity comes with a price: The main pension system for public employees is expected to cost taxpayers $2.3 billion this year and has long-term obligations that it is $85 billion short of being able to fund.