A bill currently under consideration in the California\u00a0legislature\u00a0would\u00a0grant additional pension benefits to the state\u2019s public safety workers, but it would come at the cost of\u00a0eroding\u00a0several crucial\u00a0guardrails established by the 2012\u00a0Public Employees\u2019 Pension Reform Act\u202f(PEPRA), which\u00a0is\u00a0the state\u2019s\u00a0multi-decade\u00a0plan to\u00a0manage runaway costs and\u00a0eventually close its over\u00a0$300 billion\u00a0in government pension debt.\u00a0Reacting to preliminary cost estimates for the proposed bill,\u00a0state\u00a0lawmakers amended\u00a0it to mitigate\u00a0some of\u00a0the expected\u00a0burden on taxpayers,\u00a0but\u00a0the text as it stands\u00a0would\u00a0still impose\u00a0high\u00a0costs\u00a0on\u00a0the state\u2019s\u00a0already-stressed\u00a0state,\u00a0city,\u00a0and county governments.\u00a0<\/p>\n
Assembly Bill 1383 (AB 1383<\/a>), which has passed the assembly and is now\u00a0under\u00a0consideration\u00a0in the senate,\u00a0would\u00a0grant\u00a0public safety workers pension boosts by increasing\u00a0final pension\u00a0benefits, removing\u00a0cost-sharing requirements, and lowering\u00a0the\u00a0minimum\u00a0retirement age.\u00a0The bill would also\u00a0reclassify\u00a0pension contributions as a collective bargaining issue,\u00a0reversing over a decade of efforts to curb rising public pension costs and possibly opening the door to many more costly pension increases.\u00a0<\/p>\n A\u00a0Reason Foundation\u00a0analysis<\/a>\u00a0of AB 1383 indicated that the\u00a0original proposal could have added an estimated $12 billion to\u00a0$ 14 billion in new costs over 30 years, imposing a significant financial burden on cities and counties (and ultimately taxpayers) that would bear the costs of these newly granted benefits. Lawmakers seem to have heeded this warning, amending the bill last month to\u00a0greatly reduce\u00a0the estimated costs on taxpayers.\u00a0<\/p>\n The\u00a0May\u00a0amendment\u00a0to AB 1383\u00a0greatly narrowed\u00a0the benefit enhancement being granted to police and firefighters. Instead of increasing the pension multiplier (the part of the pension formula that determines the actual size of a benefit) for all public safety employees, the proposal would maintain the existing multipliers. The amendment also clarified that no benefits would be retroactively increased, meaning any new enhancements would apply only to years served after 2027.\u00a0<\/p>\n These amendments will reduce the long-term cost evaluation of AB 1383, but several concerning features\u00a0remain\u00a0in the bill under consideration. The bill will still allow police and firefighters to retire at age 55, down from the current 57.\u00a0Caps on the income used to calculate pension benefits\u00a0will also rise, granting richer benefits to\u00a0the\u00a0highest\u00a0earners. The bill will erode crucial cost-sharing requirements\u00a0established\u00a0by PEPRA, opening the door to the runaway costs the state saw before 2012.\u00a0<\/p>\n The ever-growing costs of public employee retirement benefits have become a major concern for local governments, especially those that have experienced financial hardships in the past or are on the brink of a major fiscal crisis. A 2018\u00a0report<\/a>\u00a0from the League of California Cities found that the share of local general funds dedicated to California Public Employees\u2019 Retirement System (CalPERS) benefits had risen from 8.3% in 2006 to over 11.2% in 2018 and was expected to reach over 15.8% of local general funds by 2024.\u00a0\u00a0<\/p>\n