A woeful period in the red for California’s pension system has compelled Democratic Gubernatorial candidate Jerry Brown to back state employee pension reform.
The implementation of any pension reform scheme will affect over 1.6 million individuals drawing benefits from the California Public Employees’ Retirement System (CalPERS), and over 833,000 individuals drawing benefits from the California State Teachers’ Retirement System (CalSTRS).
In July of 2009, CalPERS reported losing over $56.2 billion for the 2008-2009 fiscal year. That same fiscal year CalSTRS lost over $43.4 billion. Both funds have recovered somewhat in the interim, with CalPERS reporting a $19 billion gain in assets and CalSTRS gaining $10 billion in assets. The 2009-2010 fiscal year marks the first time in two business cycles that either pension has recorded gains.
Brown’s proposals directly mirror similar proposals made by Governor Arnold Schwarzenegger and Republican Gubernatorial candidate Meg Whitman. All proposals on the table would require increased contributions from state employees to their pensions as well as raise the retirement age under which a retiree could begin to claim benefits. Brown would see retirement age set between 55 and 60, while Whitman would similarly set retirement between 55 and 65.
The main difference lies in Brown’s desire to keep the existing framework of the state pension system embodied in both the and the CalSTRS. This is in direct contrast to Whitman wanting to gradually transition state pensions to a 401(k)-style plans.
According to Dr. David Baggins, Political Science Department Chair at Cal State East Bay, the fundamental difference in vision for the future of State workers pensions lies in their differing views on purpose of government.
“Jerry Brown has served a lifetime in and around government. He believes government is a good idea and that we need to pay for government and that government should deal with the problems of civilization,” Baggins said.
Regarding Whitman, Baggins said, “She comes from a perspective of business and basically thinks government…is a bad idea. She thinks it’s wasteful, drives up taxes, and that we should have less of it.”
He argues that when the dust settles, the winning candidate will look out for the those who provided him or her critical support. Brown would be more inclined to raise taxes to pay for social programs to redistribute wealth to pay for a social safety net, while at the same time Whitman would be more inclined to limit taxation and limit the extent of the social safety net.
Ideological considerations aside, the financial condition of CalPERS requires our Gubernatorial candidates to be ready when a solution to stabilize the state pension system once they take office.