Taxpayers are now contributing nearly $25 billion a year into public pension systems. That’s enough to make higher education free in California, covering tuition, books, food and housing for all students attending the University of California, California State University and community colleges.
Retirement benefits for public workers are becoming such a burden that they are starting to crowd out jobs, street repairs, library and park services.
State and local government employment in California will be one of the most sluggish sectors—growing by a mere 0.5 percent over the next several years—according to an assessment by The University of the Pacific’s Center for Business and Policy Research. The center attributes the drag to “rising pension costs.”
School budgets are growing, but pension costs are growing more quickly. Nearly 40 percent of the increase in school budgets will be absorbed by higher pension costs. The UC system authorized the first in-state tuition hike on students in seven years due in part to soaring pension outlays.
At the state level, California’s pension contribution rates for firefighters and highway patrol officers have tripled. In 1990, the state put in about 16 cents to pensions on top of each dollar a firefighter received in wages and 18 cents for highway patrol officers. Today, the state contributes 44 cents for firefighters and 54 cents to highway patrol officers.
Since Brown returned to office in 2011, state retirement and health care contributions have nearly doubled, from $8.3 billion to $15.6 billion.
Local government officials are also sounding the alarms. At a CalPERS hearing in September 2017, a parade of city managers and finance directors testified how rising pension costs are hurting their ability to operate. They say tax revenues haven’t kept up with skyrocketing personnel costs, in large part because of pensions.
“We’ve been saying the bankruptcy word, which is not very popular,” said Ruth Wright, finance director in Oroville.
The impact of retiree debt could also impact public workers, potentially jeopardizing their benefits.
For the first time in California, four retired city employees in the tiny Sierra Valley town of Loyalton saw their pensions slashed because the city defaulted on payments to the pension fund. CalPERS has since taken action on other agencies that try to leave the fund without paying hefty termination fees.