The State Worker

Chronicling civil-service life for California state workers

August 12, 2011
Study calculates savings from 'pension reform' proposals

A study bankrolled by a Texas billionaire concludes that shifting more contribution costs to employees, switching to a federal-style "hybrid" retirement plan and other changes could save state and local governments billions of dollars each year.

The California Foundation for Fiscal Responsibility received $150,000 from John D. Arnold to pay for the report, according to Bloomberg.

Arnold is a former Enron trader who made his fortune by buying and selling natural gas. Enron, the now-defunct Houston energy company, played a major role in California's energy crisis 11 years ago. Arnold's trades reportedly had little impact on that scandal.

Now Arnold and his wife, Laura, have set up their own non-profit foundation that will be involved in pension reform efforts around the country. It's the first time that a deep-pocketed figure has put money into current pension reform efforts.

Steve Maviglio, spokesman for union coaltion Californians for Retirement Security said that residents here have historically rejected ballot initiatives backed by outsiders and that pension changes "should be addressed at the bargaining table and through our elected officials."

The Capitol Matrix Consulting report today is the third and final chapter of its take on public employee compensation, health care and pension costs. This time it projects what various changes promoted by the foundation would mean for government pension costs.

For example, rolling new employees into a "hybrid" plan like that offered to federal workers -- which includes a small guaranteed pension, Social Security and a 401(k)-style retirement account -- would save state and local government about $250 million immediately -- and much more over time.

Splitting pension contributions 50-50 between employers and employee would have a much bigger immediate impact, saving local government up to $4 billion annually and saving the state about $2 billion. Currently the state and local governments pay about $16 billion in pension contribution costs with their employees paying about $11 billion, the study's writers estimate.

CFFR and Capitol Matrix issued the first two chapters in May. They made a splash by concluding that public and private sector employees earn roughly the same wages, but that government pension and retiree health benefits swing the total compensation competition decidedly in public employees' favor.

Unions hammered that earlier publication and this latest installment for tromping on the notion of vested rights, making flawed assumptions and using stale numbers.

"Bottom line, the CFFR report - including each of its three installments - amounts to a political document built on outdated and skewed data," Maviglio said. "It provides an inaccurate view of retirement benefits for public employees.

Here's the report. Chapter 3, "Government Costs of Retirement Programs," starts on page 111.

California Public Sector Retirement Programs and Compensation

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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


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