Somebody should sponsor an initiative banning increases in public employee compensation unless the state budget is balanced. Because even as the California Legislature grapples with a $12 billion budget deficit, it’s considering several pension-boosting bills, all by Democrats.
Assembly Bill 1383 is by Assemblymember Tina McKinnor of Inglewood. Starting in 2016, for public safety employees it would undo many reforms from the 2013 Public Employees’ Pension Reform Act, former Gov. Jerry Brown’s signature achievement.
An analysis by the California Public Employees Retirement System found the bill would increase “the present value of future benefits by approximately $5.3 billion for all state, schools, and local agency plans.” That is despite CalPERS’ funded status being only 75% as of June 30, 2024.
Status: AB 1383 unanimously passed the Assembly Public Employment and Retirement Committee, called the PER Committee. Yea votes included Republicans Juan Alanis of Modesto and Tom Lackey of Palmdale, both with public-safety backgrounds. It’s now in the Appropriations Committee awaiting hearings.
Assembly Bill 569 is by Assemblymember Catherine Stefani of San Francisco. PEPRA bans negotiating higher retirement payments above set levels. This bill would “authorize a public employer … to bargain over contributions for supplemental retirement benefits” with a union.
Stefani said the benefits boost was needed because local governments are having problems hiring people. Retorted Stanford University professor David Crane, a budget expert, “She’s carrying a bag for government employee unions.”
Status: It also passed 7-0 in the PER Committee and now is in the Appropriations Committee.
Assembly Bill 1439 is by Assemblymember Eduardo Garcia of Coachella. It would ban public-employee retirement systems from making new investments in development projects in California “unless those projects include labor standards protection.” The main requirement is to use only “prevailing wage” labor. That is, non-union workers would have to be paid the same as union workers, commonly doubling labor costs.
This one is twice bad. It would interfere with the objectivity of investment decisions by CalPERS and the California State Teachers Retirement System. That could reduce portfolio values, which under state law means the taxpayers would pick up the tab. CalSTRS’ funded status is 76.6%, a little better than CalPERS’ 75%. But both already are well below 100% and don’t need to be reduced.
Second, AB 1439 would increase the cost of the “development projects” themselves. For example, a housing project would be more expensive, with higher rents passed on to tenants – during a housing crisis.
Status: The bill is in the Assembly PER Committee awaiting hearings.
Assembly Bill 1054 is by Assemblymember Mike Gipson of Carson. For California Highway Patrol officers and state firefighters, it would establish the Deferred Retirement Option Program as a “voluntary program” within CalPERS. “The bill would also require the program to result in a cost savings or be cost neutral.”
A DROP plan is supposed to keep workers on the job longer. They “retire” on paper, while continuing to work, with their pension payments going into a separate account. When they fully retire, the DROP money is paid out, with interest, as a lump sum
While AB 1054 promises no cost to taxpayers, a study by Ryan Frost of the Reason Foundation found a common DROP outcome is “poorly funded plans and a swamp of unfunded liabilities.” Typical was the Dallas Police and Fire Pension System’s DROP plan, which “single-handedly brought the pension system to its knees, with 56% of all assets in the system earmarked to pay for DROP withdrawals.”
AB 1054’s special DROP carve-out from PEPRA also only would benefit some CalPERS members. That could lead to carve-outs for other public-employee groups, defeating PEPRA’s aim of uniformity and standardization across jurisdictions.
Status: AB 1054 is in the PER Committee awaiting a hearing date.
Based on Gov. Gavin Newsom’s May Revision budget numbers, Crane found “$45 billion of spending on salaries and benefits for 255,000 state employees, which translates into $177,000 per employee.” That’s what happens when the public-employee unions run the state and why California taxes are the highest in the country.
When is the greed going to end?
John Seiler is on the SCNG Editorial Board
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