CALIFORNIA FOUNDATION FOR FISCAL RESPONSIBILITY

QUESTIONS & ANSWERS
ABOUT THE PUBLIC EMPLOYEE BENEFITS REFORM INITIATIVE

How much money will the initiative save state and local government agencies?

By reducing the cost of pension benefits and raising the retirement age for full pension and retiree health benefits, the initiative will save California state and local government agencies more than $500 billion during the next 30 years.

How old would new government employees have be to receive full retirement benefits?

New government employees in non-safety positions would have to work until their full retirement age under the federal Social Security program, currently from 65-67 depending upon when an employee was born. Police officers and firefighters would be eligible for full benefits at 55 years old and other Safety employees would be eligible at age 60. New employees who retire before their full retirement age would be eligible for reduced benefits.

How did the initiative establish the new benefit levels?

The benefit levels were set to allow new full career government employees to earn lifetime pension benefits of between 60-67 percent of their average base salary, including Social Security payments if earned while in a public agency position. Financial planners recognize this is an adequate guaranteed income base for well funded retirement plan that includes additional private savings.

How do these pension benefits compare to those offered in the private sector?

Guaranteed lifetime pensions are quickly disappearing from the private sector, but they will remain in the public sector under less costly benefit levels. Yet the cost of lifetime pension benefits for most employees under the initiative will be reduced to about the same level as the 401(k) match most frequently offered in the private sector, about 6% of salary each year.

How does the initiative protect public pension funds from raids by government officials?

The initiative requires all public agencies to make full payments to their pension plans every year, prohibiting the "payment holidays" too often taken during stock market boom years that create billions in unfunded liabilities when market returns eventually drop. The initiative also prohibits retroactive benefits which can also create large unfunded liabilities. Finally, the initiative prohibits taking money out of the pension or retiree health care funds for any purpose other than paying their respective benefits.

Does the initiative impact death and disability benefits?

Death and disability benefits are protected for all new and current employees of any public agency.

Who is considered a new government employee subject to the initiative's limits?

A new government employee is anyone who has not worked full time for a California public agency or education institution prior to the initiative's July 1, 2009 effective date.

Is there any way to exceed the initiative's limit on benefits?

Public agencies may exceed the initiative's benefit limits with approval by two thirds of their voters during a statewide general election. Benefits may be increased above the limits for state employees and University of California employees by a three fourths vote of the legislature. Yet the full retirement ages cannot be raised without amending the state constitution.

Why is this initiative a constitutional amendment?

The initiative was drafted as a constitutional amendment to provide a uniform benefit limit that applies to all government agencies. Competition for government employees has been a major factor in the recent increases in retiree benefit costs.

Why do we need this initiative?

Most state and local government agencies have seen dramatic increases in their pension and retiree health care costs during the last decade. The state of California's own annual pension bill has increased from $160 million in 1999 to $2.7 billion this year. These rising costs and more than $200 billion in unfunded liabilities are taking the money needed to invest in education, transportation, health care and public safety for decades to come. This initiative will reverse that trend and can help pay off those mounting retiree benefit debts.

Who is the California Foundation for Fiscal Responsibility?

The California Foundation for Fiscal Responsibility is a non profit organization dedicated to educating the public officials and the general public about government retiree benefits issues. It is also the sponsor of The Public Employee Benefits Reform Initiative.

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