Other states' pension fixes resisted here

Despite facing a $50 billion future debt for unfunded public employee pensions, California still resists reforms that some other states have adopted. Continued delay potentially adds to the obligation of taxpayers, who are responsible to make good on the retirement promises government makes.

Politically powerful California government unions are the reason reforms haven’t been implemented. But in 17 other states, benefits have been lowered for new hires, retirement ages extended and employee contributions increased.

California taxpayers are legally responsible to pay what’s owed if too little is set aside or earned in investments to cover these expenses. Recent pension fund investment losses aggravated California’s problem, now estimated to be $50-billion more than the state has set aside.

Nationwide, a $1 trillion gap exists between what’s funded and what’s promised by governments at all levels, the Pew Center on the States estimates. In the past two years, the expanding shortfall has prompted 10 states to increase retirement contributions by employees and 10 states to lower new employees’ benefits, or increase their retirement age and required years of service.

But the vast majority of California local and state governments haven’t acted. Moreover, a ballot initiative to roll back benefits for new hires died for lack of financial backing to qualify it for the November ballot. Although Gov. Arnold Schwarzenegger in January proposed state workers increase their contributions by 5 percent, he’s left it to a reluctant, union-shy Legislature to make the reform happen.

In a recent Register op-ed column, GOP candidate for governor Meg Whitman said new state workers should have retirement plans with fixed employer contributions, like 401(k) accounts in the private sector, rather than the existing defined-benefit plans. She also called for retirement age to be increased from 55 to 65 for most current state workers, with longer vesting periods and increased contributions.

Replacing fixed-benefit systems would reduce taxpayers’ exposure if pension-fund investments tank, and requiring employees to contribute more to their own retirements could reduce taxpayers’ upfront costs, as well. But so far, unions remain opposed to their members paying more or losing guaranteed benefits. We’re interested to see how Ms. Whitman would implement her reforms, but leaving it to the Legislature as Mr. Schwarzenegger has probably dooms the effort.