California’s current public pension system is unsustainable in both political and fiscal terms. Governor Jerry Brown’s proposal is a concrete path to fix the system.
The retirement funds of CalPERS for California public employees, CalSTRS the state teachers’ plan, and UCRS, the the University of California plan were hit particularly hard by the global financial crisis. The combined portfolio losses totaled $109 billion, according to Stanford’s Institute for Economic Policy Research. At the same time, numerous stories of some employees retiring with combined retirement plans or guaranteed six-figure pensions have stirred public outrage among private sector workers who have seen their 401(k) plans decline.
There is no doubt that the promise of a good retirement, as part of the overall compensation package, balanced out what many saw as the low- to middle-range salaries in public sector jobs. But, things can’t always be as they were and the times are changing.
Brown’s proposal will boost the retirement age from 55 to 67 for new employees who are not public safety workers, will create a mandatory “hybrid” system for future employees, and will end the spiking of pensions by manipulating salaries.
State employee groups have already made concessions such as their increased pension contributions from 5 to as much as 11 percent of salaries. But this isn’t sufficient.
Brown’s proposal is a serious effort and it provides the basis for reform of the public pension system. On the political horizon, it we believe it is time to take advantage of a thorough and open debate so that voters can consider a realistic proposal that takes into account today’s realities.