The California Public Employees’ Retirement System decided Wednesday it is more prudent to pay now rather than later. The $600 million increase in contributions by the state to the hemorrhaging pension fund was approved yesterday after State Treasurer Bill Lockyer switched course. In May, he questioned its prudence last month amid a skyrocketing budget deficit. Lockyer was appeased according to this spokesperson after a non-partisan analysis of the plan found the increased payments would add just $87 million to the deficit.
News of the increase comes at a time when the governor and legislators in Sacramento are searching for ways to reduce future costs to the pension program after the poor economy severely cut into the plans investment performance along with alleged improprieties by those maintaining its portfolio.
The $600 million outlay Wednesday also came with possible cost-savings on another front. Gov. Arnold Schwarzenegger negotiated concessions from four state employee unions allowing for rollbacks in their hard-fought pension plans. If approved by the unions, the deal would save the state $72 million during the next fiscal year, according to the Los Angeles Times by increasing the retirement age of new hires by five years, while having employees immediately add 10 percent of their salary towards retirement.
The double dose of good news for critics of the pension plan may not have been a coincidence. Earlier in the month, Schwarzenegger boldly told the Legislature he would not sign a new budget without pension reform, but some believe the treasurer’s flip-flop on the issue too easily dove-tails with suspicions Schwarzenegger’s acquiescence with the increased payments in such a dire economical atmosphere is a ploy to prod more significant reforms in the future. An interesting report published in February by the Pew Center, though, urges states to keep payments current or risk burdening future budgets and generations of taxpayers.
In San Leandro, mayoral candidate Stephen Cassidy has attempted to make rising pension costs a campaign issue and Stephen Hollister is one of many local city managers in favor of reeling in the costs owed to city employees.