Politics & Policy

California Pension Reform

A fair deal for taxpayers and state workers in California.

To get spending under control in Sacramento, the next California governor must have the courage to confront the public-employee unions and reform the state pension system. Short of raising taxes or cutting education to the bone, there is no other way to dry up the red ink in the budget.

The amount the state spends on the worker-retirement system has increased by 2,000 percent in the past decade. This year alone, the state will spend $3.3 billion on pensions and other retirement benefits for government workers. Conservative estimates peg the system’s unfunded liability at $182 billion. This means the average household in California is on the hook for nearly $15,000 unless bold reforms are put in place.

To understand the pension crisis, you have to closely examine the lavish benefits politicians have promised to win union support for their campaigns. Under the current system, government workers receive retirement benefits that are far more generous than what is available to Californians who work in the private sector. Many state workers can retire today at age 55, after 30 years of work, with 60 percent of their salaries and 100 percent of their health-care benefits for life. For example, a DMV field rep who retires at age 55 could expect to draw a pension valued at $400,000. For some state workers, the benefits are much higher. The pension of a prison guard could easily be $1.4 million.

In comparison, the median American household only has $100,000 saved at retirement. It is simply unfair to ask non-government workers to pay higher taxes to fund benefits that far exceed what they can ever expect to receive in retirement. It’s also dishonest to continue promising benefits to state workers that are so woefully underfunded.

We have an obligation to both taxpayers and government workers to find a solution that will guarantee the solvency of the state’s pension fund without requiring higher taxes. We must raise the retirement age for non–public safety workers from 55 to 65. We must require state employees to contribute a larger portion of their salary to help pay for their retirement benefits. We must extend the vesting period, and we must bring new government workers in under a different deal where they receive a defined-contribution retirement plan similar to the 401(k) plans that most taxpayers have.

Jerry Brown, who enacted collective bargaining for the public-employee unions during his governorship in the 1970s, bears direct responsibility for the unfunded liability in our state retirement system. Brown has teamed up with union bosses to attack my policies and my business background because, for them, pension reform is unacceptable. They believe your tax money is their entitlement. California finds itself facing a ticking fiscal time bomb as a result. A meltdown of the state retirement system would be a disaster for both taxpayers and the government workers who deserve a strong and stable pension fund.

Conventional wisdom in California holds that the unions are too powerful to allow these much-needed reforms to pass, but the reality is we can no longer afford to kick the can down the road. Fifteen other states have enacted pension reforms similar to those I am proposing. New Jersey, Rhode Island, and New York, three states that have workforces with a higher percentage of union workers than California, have shown that reform is possible. It’s time for the people of California to face the problem and work together to get the job done.

Meg Whitman, former president and CEO of eBay, is a Republican candidate for governor of California.

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