Calif. Could Cut Pension Spending With Hybrid System, Report Finds
California could reduce spending by $250 million now and billions of dollars more later by switching to a hybrid pension system that provides retirees with a monthly check and 401(k)-style savings plan, according to a report by the California Foundation for Fiscal Responsibility, the Los Angeles Times' "Money & Company" reports (Lifsher, "Money & Company," Los Angeles Times, 8/12).
Context of Report
Earlier this year, public pension reform was a main point of debate as state lawmakers negotiated a state spending plan.
GOP leaders unsuccessfully pushed for pension reform, and Gov. Jerry Brown (D) proposed his own pension changes that have not gained support in the state Legislature (Lin, AP/Contra Costa Times, 8/12).
According to the report, California could reduce spending by about $2 billion immediately if state employees were required to pay up to half the cost of their early retirement health insurance premiums.
The report noted that the proposed pension changes could generate between $3 billion and $4 billion in annual savings at the local government level.
Michael Genest -- a former state director of finance and one of the study's authors -- said the findings could help policymakers develop legislation or ballot measures aimed at reducing taxpayers' long-term pension obligations.
CalPERS criticized the California Foundation for Fiscal Responsibility's research as flawed, saying the study "is based on artificial models and doesn't use real data." The pension fund also said the study "falls short on specifics and lacks comparative data" ("Money & Company," Los Angeles Times, 8/12).
Other observers have criticized the report because of its connections to people outside the state (Ortiz, "The State Worker," Sacramento Bee, 8/12). The foundation received $150,000 for the study from the Texas-based Laura and John Arnold Foundation. John Arnold is a former Enron trader who became a billionaire as a hedge fund manager (Evans, California Watch/San Francisco Chronicle, 8/12).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.