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Editorial: CalPERS gets big new burden

2002 LAW AND A NEW RULING IS PENSION GRAVY FOR FEW WORKERS

Published: Friday, Nov. 21, 2008 - 12:00 am | Page 14A

As tens of thousands of state workers brace for possible pay cuts and layoffs, a lucky few retired state workers can look forward to bonuses in their pension checks. Anyone wondering who is responsible need look no further than the Legislature and former Gov. Gray Davis.

In 2002, California legislators included 3,200 state employees in more than 90 classifications – among them milk testers, billboard inspectors, barbering examiners and deputy directors of the Department of Real Estate – in the universe of state employees who qualify for safety retirement benefits. Such benefits had previously been reserved for law enforcement officers and firefighters. The bill, approved by lawmakers and signed by Davis, raised the pensions for the newly designated safety employees by 25 percent.

By 2004, when the enhanced benefits went into effect, the state was struggling to pay its existing pension bill, which had spiked to $2.5 billion, an 18-fold increase in just four years. That year the state had to borrow close to $1 billion to pay retirement costs. Various committee analyses pegged the cost of the newest enhanced pension benefits at an unrealistically low $8.9 million a year.

This page wrote more than 40 editorials urging the Legislature to rescind the benefits before they went into effect. Milk testers and billboard inspectors, we argued, did not deserve pension benefits that were 25 percent richer than pensions most other state workers received. Their work, while important, did not involve the life-and-death risks or unusual physical demands that have been used to justify richer pensions for police and firefighters.

Now, as it turns out, the costs of the enhanced benefits for milk testers et al. will be much higher than legislators or the public were led to believe. The union that pushed for enhanced benefits has won an arbitration ruling that requires the richer pension formula to be applied retroactively. If that ruling stands, the increased benefits will be calculated based on a worker's entire career, not just from 2004, when the increases went into effect. How much will that cost? No one knows for sure. State actuaries haven't done the calculations yet, but it is likely to be at least tens of millions of dollars.

The richer benefits will put more strain on the state's already strained retirement fund. Just last month, the California Public Employee Retirement System warned state and local government officials to expect to have to make bigger contributions to the retirement fund in the next few years to make up for recent stock market losses. The retirement fund, which peaked at $260 billion in 2007, had dropped to $176.2 billion as of Wednesday. Meanwhile, the stock market continues to falter.

Think about it. Current state workers face layoffs and pay cuts; poor children are being denied health insurance; public universities in California are raising fees and cutting access.

In the midst of this unprecedented fiscal meltdown, retired livestock inspectors, funeral home inspectors, polygraph examiners – those are just some of the workers in more than 90 state job classifications who qualify for the 25 percent pension hike – will get fatter paychecks from the state.

Government critics regularly complain about waste, fraud, and abuse. In the case of these pension benefits, the criticism is more than justified.


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