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Calpers’ Simple Solution to Pension Crisis: Pay Us More


Executives at the Calpers state pension system are proposing a new plan to plug its $87 billion dollar hole and bring it to fully funded status in 30 years. The road to solvency would be rough, requiring municipalities to pay as much as 50 percent more in pension contributions. Bloomberg has the details:

In a version of pay-me-now-or-pay-me-later, Milligan said the plan “will result in a lower probability of large increases in employer contribution rates” in the future, according to a report to a Calpers committee. If approved, the plan could be presented to the full board as soon as tomorrow.

Smoothing out gains and losses over 15 years, rather than accounting for them in one year, helps to ease potential spikes in the annual contribution rates. The rates are calculated as a percentage of the payroll of the state, cities and other local governments, financed by taxes.

It’s easy to see why Calpers would like this plan: all the money would come from increased contributions from state and local governments, taking the pressure off an investment portfolio that is unlikely to live up to expectations.

But there’s good reason to think that pensioners’ benefits still wouldn’t come through as promised, even with this plan. Fifty percent is a massive increase for cities that are already struggling with their budgets, especially considering that contributions to Calpers are already nearly four times what they were a decade ago. We’re already seeing signs that voters, facing declining wages and dwindling savings, are tired of being asked to pay more for public workers’ retirement, even as government services are slashed. Given the sacrifices already made, asking distressed taxpayers to chip in another 50 percent sounds like a tough sell.

And there’s a real question of social justice and ethnic harmony here. Just how much should services to mostly low income, mostly Hispanic kids be cut in order to keep up payments to mostly better off, mostly white retirees — especially when these white retirees never insisted on the state taking the simple prudential steps that could have avoided this crisis in the first place?

[Aaron Kohr /]

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  • Andrew Allison

    “The problem with socialism is that eventually you run out of other people’s money”

  • LivingRock

    So I’ve got a friend that’s a benefit coordinator for a company that employs hundreds of people. She’s always looking for better ways to provide benefits. Obviously this means providing benefits the employment market desires to attract and keep valuable employees, but it also means doing this as efficiently as possible so the company can afford it. She said if she ever walked into a meeting and said “we’re going to charge more, and/or we’re going to provide less” she’d be laughed out of the room. It’s the structure and the delivery method of benefits that require concise forward looking management and creativity to keep the benefits programs viable.

  • Jim Luebke

    OK, what do you mean by “services”?

    Do you mean police, fire, efficient schools?

    Because if you mean the sort of giveaway programs that gave Modesto’s Stanislaus County the nickname “Santa Claus County”, it’s not clear how denying money to people who worked for it for the sake of giving it to people who didn’t counts as “justice”.

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