The State Worker

Chronicling civil-service life for California state workers

March 26, 2009
Public pensions should go from 'gain sharing' to 'pain sharing'

Malibu-based public pension consultant Girard Miller lays out the case for shifting more public pension costs to employees in,"Sharing the pension pain," in Governing.com. A few paragraphs will give a sense of his argument:

A decade ago, public employee unions lobbied for "gain-sharing" in which they got a share of governmental revenues or surplus investment returns. Very few governments actually established such systems, but those who did should now be demanding "pain-sharing" arrangements. Others may have no choice but to pursue the same course, because they naïvely granted de facto 'gain-sharing' deals through permanent and irreversible benefit increases when stocks peaked in 2000. Now they must achieve equilibrium through higher contributions ....
An ideal, properly balanced solution for most employers would be to require or bargain for their employees to pay one-half of the increased costs of pension benefits that resulted from the market meltdown. In some cases, this will take several years to accomplish, because of actuarial smoothing. In some cases, the increase in payroll withholding may be too abrupt for employees to absorb if their salaries have been frozen, and it might take a few years to ramp up their contributions ...
A corollary remedy for retirement medical benefits plans is to split the actuarial cost equally between employers and employees. Given the mounting magnitude of the OPEB underfunding (retiree health care), the primacy of pension benefits, and tight budgets everywhere, this may also require several years to ramp up, for both employers and employees ...

Retirees, Miller says, should share the pain, too. Government should defer COLAs:"... If salaries are frozen, in the worst economic crisis in 80 years, shouldn't pensions be as well?"

Click here to read the Miller article. You can read Miller's bio at this link.

On a related note, the San Diego Union-Tribune last weekend called for the 1,500 California government agencies that provide pensions through CalPERS to, "... return to pre-1999 pension benefits for all new hires. The old norm of non-public safety employees retiring with a pension equal to 2 percent of final pay times years of service wasn't just adequate; it was generous."

You can read the U-T editorial here.

Then the Daily Breeze last night published, "The pension predicament," that details how Redondo Beach, already struggling with falling tax revenues, now faces higher CalPERS' pension contributions. It also calls for pension changes.

You'll see more and more of these editorials and opinion pieces as CalPERS prepares to announce how much more employers will have to kick in to make up for the fund's asset losses. Could this create pressure to change pension benefits (for new hires, at least) on the state level?


On October 14, The Sacramento Bee will temporarily remove commenting from sacbee.com. While we design the upgrade, we encourage you to tell us what you like and don't like about commenting on sacbee.com and other websites. We've heard from hundreds of you already and we're listening. Please continue to add your thoughts and questions here. We also encourage you to write Letters to the Editor on this and other topics.



About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at jortiz@sacbee.com.

FOLLOW US ON FACEBOOK

Now on the State Worker column

State Pay Database

This database allows you to search the salaries of California's 300,000-plus state workers and view up to four years of their pay history.

Categories


October 2013

Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    

Monthly Archives