In 1999, in a bipartisan display of unhinged mania, the state Senate voted 35-0 and the Assembly 70-7 for Senate Bill 400, which drastically changed pension rules after it was signed by Gov. Gray Davis. Why was it unhinged? Because it granted retroactive pension increases of 50% in the formula for state public safety officers and let other state workers retire with their full maximum pensions at age 55 — but did so without addressing the additional long-term cost to taxpayers of the extraordinarily generous decision. And it led many local governments to join the state in providing much more costly benefits.
Why did lawmakers act so irresponsibly? Because they chose to believe the absurd claim of the California Public Employees’ Retirement System that the stock market boom that began in 1995 would continue in perpetuity — and so CalPERS would have no problem paying out far more in benefits each year.
That, of course, was not a sensible assumption. The stock market boom ran its course in early 2000. And the state, which only had to provide CalPERS with $160 million in 1999, expects to have to provide the pension giant with $9.8 billion in the coming fiscal year. The agency’s unfunded liabilities are immense and hang over California.
This gigantic mistake eventually led to the Public Employees’ Pension Reform Act of 2012, shepherded to passage by Gov. Jerry Brown. Though the reform mostly applied to new hires, its stricter rules for benefit formulas, increased retirement ages and safeguards against late-career pension spiking have had a very positive cumulative effect.
Alas, pension mania has returned to the Capitol. The 2026 version is less far-reaching than the 1999 version, but the ways it weakens 2012’s reforms are likely to haunt local governments dominated by unions. Assembly Bill 1383 passed the Assembly 70-2 on Jan. 29 and its Senate approval is considered likely. The provisions that have gotten the most attention so far are the lowering of the retirement age for public safety employees from 57 to 55, but what’s far more ominous is that it would kill the 2012 reform’s requirement that public employees must pay at least 50% of the “normal cost” of their pension benefits. Instead, all local unions — not just police and fire — could use collective bargaining to steadily shift the cost of their members’ retirement benefits to the much larger group of Californians with few or no such benefits. Who would they be bargaining with? In many cases, people they helped elect.
In New York, Democratic Gov. Kathy Hochul has repeatedly vetoed bills that would make some government pensions more generous. But it’s hard for Californians to be confident that Gov. Gavin Newsom will do the same. Taxpayers should be petrified as a result.