California Public Employee Pensions Capture Media Headlines

A debate surrounding the payment of pensions to retired government employees in California recently generated a spate of news headlines. A lobbying group named "Transparent California" released a report seeking to document the number of public employees in the state who retired with yearly pensions of $100,000, or more from the California Public Employees Retirement System ("CalPERS") on Wednesday. It claimed the retirees in this category increased in number by 63% during the past five years. Some 23,000 retirees during 2016 received pensions of at least $100,000.

Looming Pension Cuts?

The issue of paying retired public employees received legislative attention recently, after some critics complained generous payments to ex-employees from CalPERS depleted funds available to California counties and cities to provide public services. In 2013, state lawmakers decided to reduce pension amounts paid to newly hired public employees. CalPERS remains the largest public pension fund in the United States. It receives money from state, county and municipal governments to invest on behalf of their employees.

Ironically, the recently released Transparent California report surfaced during the same period of time in which some retirees on fixed incomes received notification from the pension fund they would sustain painful cuts in their benefits due to circumstances beyond their control. Reportedly, CalPERS notified four retired Loyalton city employees about reductions in their individual pensions due to a municipal default. A news article published on the Los Angeles Times website on August 6th noted numerous retirees receiving CalPERS payments in other parts of the state may sustain slashed pension benefits for this reason soon.

CalPERS Benefits

CalPers serves over 1.8 million people in California. It also oversees a state healthcare fund for 1.4 million people. CalPers manages and invests money paid to it by state and municipal governments on behalf of their public employees. However, reportedly California makes individual government units responsible for determining retirement benefit packages. Consequently, local governments must ensure the payment of sufficient funds to CalPERS to cover promised benefits. Any CalPERS payment defaults or withdrawals by government entities impact available individual pensions.

In its recent report, Transparent California claimed 25 public agencies in California paid the highest annual pensions to retired employees. A spokesman for a retired public employees lobby noted fewer than 2% of California retirees receive yearly pensions of $100,000. The average annual state pension stands at $32,400.


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