California has a surplus, but retirement liabilities remain
January 19, 2016
A few years after California faced a $26 billion deficit, lawmakers are debating how to spend a budget surplus. However, state officials have not tackled California’s unfunded pension liabilities problem, which is continuing to grow. [Contra Costa Times]
The state has amassed $220 billion of unfunded pension and health care liabilities for future retirees. As of June 2014, California’s two main retirement systems had a combined total of $116 billion in unfunded liabilities. The state health care plan has about $70 billion of unfunded liabilities.
Gov. Jerry Brown is now asking workers to pay more to fund their retirement health benefits. Brown is requesting that employees pay into a fund through deductions in their paychecks. The state would pay an equal amount under the governor’s proposal.
Brown is also proposing $350 million in pay raises in the current budge. The pay increases may be used as a bargaining chip in labor negotiations.
Last year, the state reached a deal with its engineers’ union on health care contributions. The engineers agreed to relinquish an increasing amount of their pay, which would eventually reach 2 percent of their salary. But, they also received pay raises of 5 and 2 percent.
The state is currently negotiating with four of its 21 bargaining units, and talks with 15 others are due to begin this year.
California legislators passed pension reform in 2012, but the reductions in retirement payments primarily affect new employees. The unfunded liabilities have remained.
On Monday, the leaders of a state pension reform initiative announced they are postponing their campaign and seeking to qualify for the 2018 ballot, rather than the 2016 election. [LA Times]
Former San Diego Mayor Chuck Reed and former San Diego Councilman Carl DeMaio are aiming to get two separate measures on the ballot. One would require voter approval for defined-benefit pensions for new workers and the other would limit what the government can pay toward the retirement benefits of new employees.