California cuts $170 million from pension costs

May 19, 2011

California is slated to save $170 million in pension fund payments mostly because new union contracts shift some of the costs to state worker. [MercuryNews]

New agreements with unions have boosted employee contributions by anywhere from two percent to five percent. The cost savings would have been larger if the California Public Employees’ Retirement System was not still recovering from investment losses from the recession.

The added employee contributions will trim the budget from $3.7 billion for the 2010-11 fiscal year to $3.5 billion for the 2011-12 fiscal year.

Nevertheless, it is still more than the state was paying before the market fell and the state began making up for the funds dwindling investment revenue.

Critics say the pension funds guarantee a level of benefits to public retirees that’s greater than what most non-government workers receive. In addition, they argue that the inadequately funded pensions leave taxpayers on the hook for shortfalls.

Brown has proposed some pension changes to prevent abuses and cut costs as he tries to close a $10.8 billion budget deficit, but Republican lawmakers are pushing for much more sweeping changes, such as freezing benefits and shifting to a hybrid retirement system that works more like a 401(k) investment account, the Mercury News added.



  1. slodude says:

    Myth: The average CalPERS pensioner gets 90 percent of their pay.
    September 23, 2009


    The average CalPERS member receives 50 percent or less of their pay in retirement. CalPERS has 513, 000 retirees today. The average pension is $2, 200 a month. And of that half million retirees getting a benefit, 14 percent of them earn $36,000 or less a year. Well over 40 percent of them do not receive Social Security.

    Read it yourself on the CalPers website.

    (4) 4 Total Votes - 4 up - 0 down
  2. r0y says:

    We’ll likely do what nations always do when they guarantee a pension: inflate the currency. Here’s your $2,000 a month… you can buy breakfast with it. Not to say that we’ll have Hyperinflation but just enough to make those promised amounts manageable.

    For instance, I believe CALpers estimates a 3% inflation rate? Even for a defined benefit pension scheme, a rise in inflation may not feed wholly through to an increase in the liability cashflows. For instance, in some countries pensions are not typically linked to inflation. Where they are, a cap may apply so pensions are only linked to inflation up to a level of, say, 3% (that of CALpers). Of course, in the case of a defined contribution scheme there are no pre-determined liabilities and the inflation problem collapses to one of protecting as far as possible the real value of the assets.

    For decades, investors of pension funds have protected themselves against inflation simply by buying index-linked government bonds. However, in recent years leading up to the economic meltdown, they have been encouraged into cash funds with swap overlays. Case-in-point, CALpers is linked quite a lot to Commercial Real Estate, which I don’t believe has completed its crash yet. They cannot go back to Government Bonds, as those are pretty useless (especially CA & local ones).

    The inherent problem is the guaranteeing of a certain amount for an unknown period of time (how long will one live after retirement?). All of this stacks up and exacerbates the financial situation, and has the potential to leave a lot of unprepared people exposed. The amount of economic mal-education, coupled with airs of blissful ignorance (a general apathy towards “complex” financial matters) is starting to show its terrible results.

    Perhaps we should all go back to investing in our own futures, re-aligning the tax code for such, and get off the cradle-to-grave central government care that will undoubtedly be the undoing of our liberties in the end. Thus, I agree with Brown’s vision of moving towards a 401K (or 403B) style retirement investment scheme over what is there now. People aren’t going to like it, and the unions (once they figure out what this all is) will tell him to change his mind, but at least it is a good idea.

    (4) 10 Total Votes - 7 up - 3 down
    • r0y says:

      No one else seems interested in this? Man, I don’t get any public money and I am. It’s not like it’s a non-issue.

      I can appreciate people agreeing or disagreeing, but where are the witty dialogs, wise retorts, and carefully thought out rejoinders? Sheesh, didn’t think this would be a quiet story…

      (1) 1 Total Votes - 1 up - 0 down
    • srichison says:

      Maybe no comments because what you said makes sense. Which, of course, guarantees that government won’t do it. The one thing I would add is that changing the retirement system won’t save as much as what it first appears because of the burgeoning need to raise salaries. While some public employees obviously make a killing on salary, the vast majority make less in salary than do their counterparts in private industry. The trade off has always been salary for security. Public employees essentially can’t be fired. If part of the security (defined benefit retirement) goes away, the demand for increased salary won’t be far behind. It’s still a great idea, just doesn’t save as much as you would think.

      (2) 2 Total Votes - 2 up - 0 down
      • BeenThereDoneThat says:

        Ah your still drinking the laced Kool-Aid the Union’s want you to. Quote

        “While some public employees obviously make a killing on salary, the vast majority make less in salary than do their counterparts in private industry.”

        This statement was true over 30 years ago. Today NOT!! I was just listening to the news about two weeks ago mentioning this very thing. They said that yes at one time it was the trade off of a decent retirement package for lesser salary. Then in the last thirty years the salary of the MAJORITY has caught up to at least equal and in MANY causes even more than the private sector. At the same time the retirement has stayed good and in some causes gotten even better. So your arguement holds no water. Don’t be duped into this thinking that they (unions) want you to. They want you to feel empathy for someone who is doing quite well.

        Then also add in the fact that yes like you said you about need an act of God to fire these people, even when is some cases they can be the most WORTHLESS employees. Is it any wonder that the ration of Gov’t jobs has increased DRAMATICALLY in the last thirty years. Unions are NO FRIEND of the tax payer or even their own employees. Trust me if it is them or their employees they will throw them under the bus in a minute.

        I know. I have bus tire marks on me from about twenty years ago!! Union management will always win out over their masses. Trust me.

        (-1) 5 Total Votes - 2 up - 3 down

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