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CalPERS Reform
By: Senator Bob Huff

Amidst the state’s budget turmoil and raging “cuts versus taxes” debate, Governor Schwarzenegger has sounded a voice calling for reform. Reforming state government has been strongly advocated by Republicans for years. Now, the Governor has seized upon the disarray of unsustainable expenditures and brought to the forefront of discussion reforms to various state programs, including CalPERS, the state employees’ retirement system. The CalPERs retirement system is used not just by the state, but also county and local governments.

Whether or not CalPERS reform is included in the final budget deal, there is no question that the current mechanisms determining the lavish pensions of state employees must be addressed. To be clear, even with some sort of reform, those in the system now will retain their benefits and current retirement formulas. This is a contractual agreement that can’t be broken. We need to ensure these promises are kept and the widows and children of our public safety officers are taken care of. But without some reasonable and responsible reform, the state’s general fund will collapse again under the burden of employer obligations. The current retirement system is draining scarce government resources and jeopardizing the ability of some local governments to sustain core services. The future financial requirements of some promises are simply not sustainable; we must adopt a more fiscally responsible approach.

Comprehensive reform will not come easy however, as many disagree on how best to overhaul the current system. For most categories of workers, one proposal includes a reduction in the percentage withholding for pensions, while simultaneously increasing the minimum age at which those benefits may be accessed. For instance, the current formula for many peace officers is 3% at age 50. The formula takes the amount of years that you have worked – say 25 – and multiplies by 3. “3% at age 50” equals 75% of your salary at retirement. Many of these peace officers retire at 90% of their last salary depending on how many years they served. This would change to 2.5% at age 55, effectively encouraging a longer career committal.

Another pension proposal would remove the floor for contribution levels to a worker’s pension and be accompanied by a more transparent and accountable CalPERS system, which would produce plain-language reports to be evaluated by the Treasurer and reviewed by the Legislature.

All told, reforming the CalPERS system wouldn’t score any savings in our current budget, but reform would save billions in reduced health care costs, benefits and pension payouts in coming years. My Senate Republican colleagues and I are glad to see a renewed drive to reform government and hope that it inspires all citizens- well aware of the down economy and its impact on government revenue - to take an active role in helping our government conserve every penny.

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