California Pension Costs Fuel Growing Anxiety With more than 1 million public employees, the state's pension tab is running at more than $3 billion a year. And as Gov. Schwarzenegger tries to close a $20 billion deficit, there's growing anxiety about the high pension costs. An economic adviser says pension costs divert money from other important government services, but pensioners say they earned it.
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California Pension Costs Fuel Growing Anxiety

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California Pension Costs Fuel Growing Anxiety

California Pension Costs Fuel Growing Anxiety

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This week on the program, we'll be talking about public pensions in America, the lifetime benefits that cities, states, counties and schools promise to pay their workers when they retire. But in today's economy, those pensions have become a crushing burden.

California is struggling to meet its pension obligations, and lawmakers there are calling for drastic reforms.

But as NPR's Richard Gonzales reports, retirees say a promise is a promise.

RICHARD GONZALES: Norma Pyle is a 65-year-old grandmother. She spent 20 years working in a Sacramento area elementary school as a teacher's aide and office secretary. And when she was done, Norma knew she could count on the check she's holding - her modest monthly pension.

Ms. NORMA PYLE (Retired Teacher's Aide): $739.89 is what I get. That's the gross.

GONZALES: That's just over $9,000 a year. Don't ask Norma what she thinks about pensioners like her being a burden on California, not unless you're ready to get an earful.

Ms. PYLE: We worked for it. We earned it. We sacrificed raises or whatever to make sure that we insured ourselves for the future. Is that wrong?

GONZALES: It's a question that might not come up in the best of times, but these are the worst of times, as California faces a $20 billion budget deficit and it's spending $3 billion a year on pension payments.

Mr. DAVID CRANE (Special Adviser for Job and Economic Growth, Governor Arnold Schwarzenegger): So when there's not enough money in the pot to pay the pension, what gets cut?

GONZALES: David Crane is an economic advisor to Governor Arnold Schwarzenegger

Mr. CRANE: Some other programs that would otherwise receive money. So in California, for example, that's been the University of California and California State University, significantly.

GONZALES: Public employee unions say the governor and others are trying to use retirees as scapegoats, but some pensioners are pretty easy targets.

Ms. MARCIA FRITZ (President, California Foundation for Fiscal Responsibility): Or you can get it on the internet,

GONZALES: Marcia Fritz heads the California Foundation for Fiscal Responsibility. The watchdog group's Web site lists more than 9,000 Californians with six-figure pensions. Fritz calls it the 100K Club.

Ms. FRITZ: 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.

GONZALES: Fritz says many of those big earners have figured out how to jack up their pensions through a method called spiking. It involves stockpiling vacation time and sick leave and cashing it in just as the worker is about to retire.

Ms. FRITZ: That goes into their final salary, and then they get paid that in retirement for the rest of their life.

GONZALES: Take the case of Charles Batts(ph), a retired engineer from Contra Costa County.

Mr. CHARLES BATTS (Retired Engineer): My duties was running an agency that provided wastewater treatment for half a million people. And basically we had 300 employees, roughly $80 million budget.

GONZALES: Batts had 28 years of service and a big salary. His retirement was already looking good but the rules said Batts could boost his pension even more, by cashing in 17 weeks of unused vacation and sick leave. And that's what he did. It gave him a pension almost equal to his $230,000 salary.

Mr. BATTS: If I asked you the question, if you had a legal way to maximize your income for an uncertain future, what would you do? And my belief is that everyone would take that option. So it's not a question of doing anything illegal or even anything wrong. It's a question of self-interest.

GONZALES: Besides spiking, there's another practice called double dipping. That's when a retiree goes back to work for another government agency, earns another salary and may even rack up another public pension.

Those things make headlines, yet the average California pensioner gets just $30,000 a year, says Dave Low. He's with the California School Employees Union.

Mr. DAVE LOW (Lobbyist, California School Employees Association): There's over a million public employees in California - state, city, local, schools, teachers, firefighters, cops - and less than one percent receives $100,000 pensions.

GONZALES: But it's not the size of the checks as much as it is the staggering number of California retirees getting them, says the governor's adviser David Crane.

Mr. CRANE: You have hundreds of thousands of people who are entitled to receive contractual pension payments that are owed no matter what. And that money has to come out of budgets, which in and of itself is not a problem if they're properly funded when the promise is made.

But 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.

GONZALES: 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.

Richard Gonzales, NPR News, San Francisco.

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