CALIFORNIA FOUNDATION FOR FISCAL RESPONSIBILITY

PRESS RELEASE

For Immediate Release: June 21, 2007

Government Retirement Benefits Reform Initiative Filed

Would Save Hundreds of Billions and End Pension Fund Abuses

SACRAMENTO -- The California Foundation for Fiscal Responsibility today filed with the Attorney General's office a pension and retiree health care initiative that would save state and local government agencies hundreds of billions of dollars in retiree benefit costs and would end the expensive abuses which have increased costs and run up huge deficits for public defined benefit pension plans.

"With more than $200 billion in retirement debts and skyrocketing costs crowding out the investments we need in education, health care, transportation, public safety and the environment, it is time for a statewide solution to our retirement benefits crisis. By requiring all new non-safety public employees at all levels of government to work until their Social Security retirement age for full benefits and ending the politicians' raids and abuses of public pension funds, California public agencies can offer secure retirement benefits that are fair for taxpayers and their employees," said CFFR President and initiative proponent Keith Richman MD.

The Public Employee Benefits Reform Initiative would apply its benefits cap to the defined benefit plans offered to all new state, local government, school district, university and special district employees beginning July 1, 2009. Increased security would be the only impact on the retirement benefits being earned by current employees, as the initiative requires consistent contributions to all retirement funds for all employees.

"California's huge legacy retirement costs have been aggravated by recent pension benefit enhancements obtained by public employee unions. Defined benefit plans are viable tools if they are not abused. But overly generous retirement formulas, combined with making them retroactive, have overburdened our public pension systems and ultimately our taxpayers. Municipalities not only gave attractive benefit increases when investment markets were on fire, but they also made minimal contributions to the pension plans during those good times. Our initiative stops this fiscally irresponsible practice. Sound fiscal policy, simple budget planning and fair public employee retirement benefits are all possible, and this initiative will help lead the way for all levels of California government," said Orange County Supervisor and initiative proponent John Moorlach.

Preliminary estimates show the initiative would save more than $500 billion over 30 years by raising full retirement ages and limiting benefit formulas to 60-70% replacement income in retirement for a full career's work. The lower cost of the new pension limits would generate up to a 60% savings, reducing the pension cost for most government employees from 16% of salary to 6%, a level consistent with the pension/401(k) benefit costs paid by many large private sector employers. Significant additional savings would come from requiring new employees to wait until they reach MediCare eligibility age before supplemental retiree health benefits begin.

"Many local government budgets cannot sustain the crushing burden of the retiree benefits costs now coming due. Contra Costa County owes more than $230 million a year for retiree medical benefits. If our County Supervisors started paying the bill right now, it would cost 18% of our county budget and would quickly consume money needed for public safety improvements and transportation investments. If we do not address these rising retiree costs now with a new deal for new employees, there will be enormous pressure to raise taxes in the years ahead," Contra Costa Taxpayers Association Executive Director and initiative proponent Kris Hunt said.

For more information about the California Foundation for Fiscal Responsibility and the Public Employee Benefits Reform Initiative, go to CaliforniaPensionReform.com.

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