How NOT to do pension reform


Riverside County, California recently finalized changes to their public pensions, hoping to put them on sound financial footing. Looking at $4.7 billion in obligations, and annual pension expenditures that would consume half of the total county budget by 2020, county supervisors felt it necessary to act.

The recent reforms will reduce pension costs by $360 million through mid-2016. In exchange for pension changes, county supervisors struck a deal with union reps – to increase salaries and benefits by $731 million – and that does not count an additional $40 million in new CalPERS expenses in just the next four years.

According to a recent county Human Resources analysis, “The county saved $2.5 million in the fiscal year that ended June 30. And the county faces a modest net cost of $5.1 million in the current year. But the county will have to absorb cost increases of $59.7 million in 2013-14, $119.6 million in 2014-15 and $188.3 million in 2015-16.”

Those increases come largely from raises and cost-of-living increases and are new expenses for a county that has lost almost $300 million in tax revenue since 2007. In fact, the county laid off 229 employees this year alone to balance the budget and still faces more potential job cuts in the months ahead.

Pension costs have reached a crisis point all over this country and elected officials everywhere are faced with addressing them. Unfortunately, Riverside County chose a short-term Band-Aid approach, trading small cuts now for large increases later. They kicked the can down the road a mere 4 years – with no ability to pay the increasing costs except for perhaps a good dose of wishful thinking.



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