US - Sweeping legislation that would enrol all California public employees hired from 2007 into a defined contribution plan is necessary because the current defined benefit public pension system is in crisis, according to the legislation's author.
Keith Richman (pictured), a Republican Assemblyman representing Los Angeles and Simi County, has filed a constitutional amendment with the California legislature that, if passed, would establish the California Public Employee Defined Contribution Plan, affecting all state, local and county employees hired after July 2007.
“The purpose is to stop the bleeding and implement a fundamental reform and modernisation of the public pensions system,” Richman said. “This, over the long term will save costs, markedly improve budgeting predictability and result in no new unfounded liabilities. the unfounded liabilities that currently exists need to be paid. California taxpayers are on the hook for those pension obligations and those billions of dollars.” The change would fundamentally change the state’s pension fund system, which includes global giant CalPERS and CalSTRS, as well as pension systems such as San Diego, which currently has a deficit of $1.2bn.
“The money that is going to meet these pension obligations that is not going to public safety or education or health care or needed infrastructure investment,” Richman said. “At the state level, just a few years ago, pension costs were about $160m. They have grown to $2.6bn this year, and according to the legislative analysts office, they are projected to grow to $3.5bn annually in the next few years.”
Richman cited fiscal mismanagement, enhanced pension benefit obligations, diminished investment returns and increased longevity as the main factors contributing to the “crisis.”
While Richman’s constitutional amendment lacks a contribution ceiling, a ballot initiative that he helped write stipulates that an employer’s contribution shall not exceed 6% of an employee’s base salary, or 9% for police officers and full-time fire fighters. The ballot initiative, co-authored by a taxpayers pressure group, has been filed with the state attorney general’s office.
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