Once again, the “privatization movement” folks are trying to fool the uninformed about how pension costs have “spiked” in recent years. They always use the peak years of the stock market bubble (~1999-2001) as the base line — a period of time when pension funds were super-funded (over-funded) and many public employers were paying little to NOTHING toward pension costs because the investment returns were contributing so much to the funds. While it’s true that contribution rates and amounts have increased over time, it’s nowhere near as dramatic as they try to make it seem when using “pension holiday” periods as a starting point.
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When former Gov. Arnold Schwarzenegger briefly backed a proposal to switch new state and local government hires to 401(k)-style plans, he cited soaring state worker pension costs.
CalPERS dropped the state rate from $1.2 billion in 1997-98 to less than $160 million in 1999-00 and 2000-01. A booming market yielded a brief surplus, and CalPERS spread the wealth by sponsoring a major state worker pension increase, SB 400 in 1999.
But the market fell and the surplus vanished, causing CalPERS to push the taxpayer-paid state rate to $2.5 billion in 2004-05. Schwarzenegger cited skyrocketing pension costs as he urged a switch to debt-free individual investment plans.
Then a recession and market crash punched a huge hole in CalPERS investments expected to provide two-thirds of pension money. After peaking at $260 billion in 2007, the fund dropped to $160 billion in 2009 and now has climbed back to $255 billion.
The state payment to CalPERS jumped from $2.7 billion in 2007 to the current $3.8 billion. But this 40 percent increase over five years is far short of the eye-popping “2,000 percent” increase over five years cited by Schwarzenegger.
This time, employers had not been given a contribution “holiday.” State workers aided by agreeing to increase their pension contributions, though Schwarzenegger had to hold up the budget for 100 days to get a boost from 5 percent of pay to 8 percent for most.
For the record, I have been opposed to both the pension boost and contribution “holidays” from day one, and can list at least four different pension programs (all still defined benefit, which I think is important) that would *legally* and ethically reduce pension costs in very dramatic ways.
