Study: State Should Curb Public Employee Retirement Benefits
To bring California's pension obligations under control, the state needs to reduce retirement benefits for current public workers and retirees, according to a study released by the Stanford University Institute for Economic Policy Research, the Sacramento Bee reports.
Stanford University professor of public policy and former Assembly member Joe Nation (D) authored the study.
The study analyzed CalPERS, the state teachers' pension system CalSTRS and the University of California Retirement Plan.
The study found that the total unfunded obligation for the state's largest pension systems is $498 billion in the next 16 years, 17% higher than a similar Stanford study estimated in 2010. This amount was computed using a low-risk discount rate, which refers to the rate of return on investments.
According to the study, each day that officials delay making changes to the pension systems costs the state $3.4 million (Ortiz, Sacramento Bee, 12/14).
The study noted that Gov. Jerry Brown's (D)Â 12-point pension reform plan "provides only modest additional cost savings" (McGreevy, "PolitiCal," Los Angeles Times, 12/13). Brown's plan in part would increase how much workers pay toward their retirement and health care costs and implement a "hybrid" pension system that combines a traditional pension with a 401(k)-style account (California Healthline, 11/9).
Critics Raise Concern Over Study Methods
State Treasurer Bill Lockyer (D), who was a member of a pension advisory panel for Stanford, questioned the study's methodology and conclusions. Lockyer said the study did not account for possible legal issues associated with reducing benefits for current workers. He resigned from the advisory panel in protest ("PolitiCal," Los Angeles Times, 12/13).
Ann Boynton -- deputy executive officer of benefit programs, policy and planning for CalPERS -- said the study "was written from a perspective that is intended to exaggerate perceived costs and the instability of pension systems" (Sacramento Bee, 12/14).
On Tuesday, Capital Public Radio's "KXJZ News" reported on the findings of Stanford's pension study (Milne, "KXJZ News," Capital Public Radio, 12/13).
Editorial Calls for Action on Pension Reform
An Orange County Register editorial states that while it is "problematic to revise benefits already established by contract, ... it is in the interest of all Californians to implement such changes, including public employees who don't want to see their retirement funds decimated" (Orange County Register, 12/14).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.