California Pension Costs Fuel Growing Anxiety

There are more than 1 million public employees in California, including firefighters. i i

There are more than 1 million public employees in California, ranging from firefighters to city managers. The current tab for future costs of funding pensions for public employees is running at more than $3 billion a year. David McNew/AFP via Getty Images hide caption

itoggle caption David McNew/AFP via Getty Images
There are more than 1 million public employees in California, including firefighters.

There are more than 1 million public employees in California, ranging from firefighters to city managers. The current tab for future costs of funding pensions for public employees is running at more than $3 billion a year.

David McNew/AFP via Getty Images

In his state of the state speech earlier this year, Gov. Arnold Schwarzenegger said California is "about to get run over by a locomotive." Schwarzenegger was talking about the future costs of funding pensions for public employees. Currently, the tab is running at more than $3 billion a year at a time when California is trying to close a $20 billion deficit.

There are more than 1 million public employees in California, ranging from school-bus drivers to city managers. They are people like Norma Pyle, a 65-year-old grandmother in Orangevale, a Sacramento suburb. She worked 20 years as a teacher's aide and office secretary in an elementary school, but about half of that time she worked only part time. That means only 10 years counted toward her modest monthly pension.

She says, "$739.89 is what I get. That's the gross."

Pyle says she doesn't have much patience for people who say such pensions are draining California's coffers.

"We worked for it. We earned it. We sacrificed raises or whatever to make sure that we insured ourselves for the future," Pyle says. "Is that wrong?"

The Worst Of Times

That question probably wouldn't come up in the best of times, but these are the worst of times in California.

Schwarzenegger's economic adviser David Crane says pension costs divert money from other important government services.

"So when there's not enough money in the pot to pay the pension, what gets cut? Some other programs that would otherwise receive money. So in California, for example, that's been the University of California and California State University," Crane says.

But public employee unions say the pensions are contractual and politicians shouldn't pit retirees against students and taxpayers. Nevertheless, there is growing anxiety about pension costs, especially those associated with top-salary public employees.

The Impact Of Six-Figure Pensions

Marcia Fritz, president of the California Foundation for Fiscal Responsibility, has a Web site that lists more than 9,000 pensioners who collect more than $100,000 a year. She calls it the "100K Club."

"Half of these people are public safety: firefighters, cops, prison guards — like the captains, chiefs, lieutenants. And then the other half are city managers and finance officers that had high wages and lots of years," Fritz says.

Fritz says some of these high earners can increase their pensions using a method called "spiking." It means cashing in unused vacation and sick leave just before retirement.

"That goes into their final salary, and then they get paid that in retirement for the rest of their life," she says.

Some lawmakers are trying to eliminate spiking.

At the same time, concerns about the 100K Club are overblown, says Dave Low of the California School Employees Association.

"There's over a million public employees in California: state, city, local, schools, teachers, firefighters, cops. And less than 1 percent receive $100,000 pensions," he says.

Picking Up The Tab

According to CalPERS, the state retirement system, the average California pensioner receives $36,000 a year.

Crane says the basic problem is the staggering numbers of California retirees who have been promised pension payments for the rest of their lives.

"What's happened is that governments haven't properly funded the promises as and when they're made. And the net result is innocent generations down the road have to pick up the bill," Crane says.

The governor and lawmakers and the unions are all talking about various solutions. Most involve a two-tiered system that would greatly scale back benefits to future retirees.

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