CA: Pension revamp bills exploding

Sac Bee ^ | 1/28/05 | John Hill

[NormsRevenge]

Under threat of an initiative to scrap California's traditional public pensions, legislators and others are scrambling to craft bills to repair the system instead. Gov. Arnold Schwarzenegger has endorsed the initiative to replace public pensions, which guarantee retirement income based on salary and years of service, with 401(k)-style investment accounts.

Strong interests - especially public employee unions and their allies - oppose abandoning the existing system. Now, they're under the gun to fix it.

In the recent past, proposals to rein in pension costs haven't gained much traction. This year, however, the initiative threat is leading to a bumper crop of proposed changes - many of them focusing on medical pensions, where abuses documented in The Bee have sparked public outrage.

Among the possible bills is one that would reduce workers' compensation benefits to public employees already receiving disability pensions in amounts approaching their pre-retirement salaries. Another would raise the standard for establishing that an injury is work-related.

A third would allow the California Public Employees' Retirement System to demand that pensioners past retirement age submit to medical exams to show that they are still disabled.

Still other proposals are in more embryonic stages.

Sen. Jackie Speier, D-Hillsborough, said the interest in change has grown as state and local governments have been socked with higher pension costs. But Speier maintains relief can come without dismantling the traditional system.

"It can be fixed," she said.

[68skylark]

Public pensions are a swamp of evil -- not just in California but in every state and county. I've seen many financial horrors. I hope more good politicians will tackle this problem.

A defined contribution plan (like a 401(k) plan) is probably the only good solution -- reform of defined benefit plans is hopeless.

[djreece]

Bump for reform

[calcowgirl]

Currently, each year CalPERS tells its state and local government members how much they must contribute to keep the system fiscally sound. That contribution can fluctuate wildly. In recent years, because of the sudden drop in investment returns and improvements to pension benefits, governments have gone from paying next to nothing to being on the hook for high costs.

Or, more accurately, in boom years, where they had to make only a small contribution, they decided to spend the money elsewhere. Now, when they are required to contribute again, they blame it on the pension system.

Changing to a defined contribution plan carries higher administrative costs and higher income for Wallstreet as they have to maintain investment accounts for all members.

I agree they need to revamp the benefit levels for some of the egregious labor categories (Law enforcement and Corrections), but changing to a defined contribution plan alone does not solve that.

I hope this gets a lot more exposure, and a lot more discussion.