May 5, 2011 / 10:21 PM / 7 years ago

Combatants in California pension battle trade blows

SAN FRANCISCO (Reuters) - California’s largest companies spend less than a third of what the state government spends on pensions and other benefits for retired workers, a study released on Thursday concluded as a fight over the costs of public-sector pensions intensified.

The study released on Thursday says government workers, whose pensions are typically guaranteed, can expect far more in retirement than private-sector employees. That disparity is a key focus in a nationwide battle over public pensions in particular and public workers’ benefits and rights in general.

“A state employee earning $60,000 annually will accumulate pension and retiree health benefits valued at $19,000 a year. A comparably paid employee of a large California company will receive retirement benefits worth less than $6,000,” the study by the California Foundation for Fiscal Responsibility found.

In nod to concerns about that disparity, officials across California are pressing public workers to devote more of their pay toward their pensions and retiree health plans.

A report overseen by a former California lawmaker at the Stanford Institute for Economic Policy Research last year estimated California’s pension funds for government workers, teachers and university employees face unfunded liabilities of more than $425 billion, a figure contested by fund officials.

The private study comes a day after public-sector unions rolled out a website to challenge critics of their pensions and claims that public pension costs threaten government finances in the most populous U.S. state.

At the same time, some officials are drafting less generous retirement packages for future workers.

San Diego leaders are mulling whether to go a step further and replace defined-benefit pensions for employees of the state’s second largest city with retirement accounts like private-sector 401(k)s.

Voters appear inclined to clamp down on public pensions. A recent survey for the University of Southern California and Los Angeles Times found 70 percent of respondents favor a cap on pensions for current and future public employees, while half back cuts to their pension and retirement benefits.

“I have not seen a public policy issue in the last 20 years that has arrived on the political landscape with speed and the force of the issue of public employee pensions,” said Dan Schnur, director of USC’s Unruh Institute of Politics.


A number of factors have fueled public concern about pension costs in recent years, including a campaign by Marcia Fritz, head of the California Foundation for Fiscal Responsibility, to post pension payments to retired government workers online. Several are in the six-figure range.

A public pay scandal in a small, poor Southern California town also helped focus attention on public compensation. It revolved around the city manager of Bell, who had been making nearly $800,000 a year and was, Fritz had estimated, in line for more than $30 million in pension payments in retirement.

That official has pleaded not guilty to corruption charges. The Los Angeles Times last month won a Pulitzer Prize for its probe into Bell’s finances.

Pensions figure prominently in California’s rancorous budget politics. Republican lawmakers have derailed Democratic Governor Jerry Brown’s plan to extend tax increases that expire by summer to help fill a remaining state budget gap of about $15 billion, demanding instead major changes to state pensions. Many may be too much for Democrats to accept.

With pensions under so much fire, public-sector unions on Wednesday launched a counteroffensive with a website attacking critics, including Fritz. The website describes her as one of California’s “leading Chicken Littles” (who claim the sky is falling) and says pension costs are manageable.

It notes that the average annual pension through the California Public Employees’ Retirement System is $25,000.

Voters, however, may be more in tune with the disparity issue highlighted in the study by Fritz’s group, giving it an edge in the looming brawl over California’s pension policy.

“Either you will see a ballot initiative to change pension policy or legislators are going to go a bit further toward pension cutbacks than they might want to go to ward off an initiative,” said Thad Kousser, a political scientist at the University of California, San Diego.

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