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Sacramento Pension Plans in Trouble
By Harrison Sheppard
July 18, 2007
California's pension crisis has deepened over the past seven years as the
average county fund has gone from being flush with cash to being at
least 9percent underfunded, according to a new statewide survey.
From 1999 to 2005, the trend has meant the average county has only about
91 percent of the money it needs to pay pension benefits to its retirees
in coming years, according to the report from the California Taxpayers'
Association.
That means an increasing amount of money could be taken away from county
services - such as law enforcement and road paving - to pay for the
pensions of retired employees.
"Unfunded liabilities are going up and the funding ratio - which is a
sign of how much money is being put toward future liabilities - is going
down," said Cal-Tax spokesman David Kline. "Taken together, that's a bad
equation."
The report comes amid several efforts to address the state's pension
crisis. Gov. Arnold Schwarzenegger has convened a pension reform
commission that is expected to issue recommendations by January.
Former Assemblyman Keith Richman also has authored a ballot measure to
raise the state's retirement age for new public employees and limit the
benefits they receive in retirement.
Last week, the governor's Public Employee Post-Employment Benefits
Commission concluded that the state's pension systems have an obligation
of $579 billion - with just $516 billion currently funded.
The Cal-Tax survey focused on the county level, determining that in
2004-05, the average county had an unfunded pension liability of $439
million. Only five years earlier, counties had an average surplus of $88
million.
In 1999, Los Angeles County had a $751 million surplus. By 2004-05, it
had an unfunded liability of $3.9 billion. While data for last year was
not available, Cal-Tax officials said they believe the trend will
worsen. That's because most counties have also increased the benefits
they offer retirees and current employees - including vacation and sick
leave and bigger reimbursements for education and public transportation.
But Dave Low, assistant director of government relations for the
California School Employees Association, said the Cal-Tax survey fails
to consider that investment gains are bringing pension systems closer to
full funding.
CalPERS, for example, he said, is approaching 100 percent funding this
year.
While Low said he does not believe major changes are needed for the
pension system, Richman disagrees and said broad shifts are needed.
And the former Assemblyman believes the public will be on his side as
details continue to emerge on how much pensions and benefits will cost
taxpayers.
"I think the public is becoming more aware of this issue every day,"
Richman said. "Every day throughout the state the public is learning
about the abuses of the public employee pension system and the costs
that this is going to have."
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