PUBLIC COMMENTS OF MARCIA FRITZ, CPA

March 9, 2007

. . . speaking before California's Public Employee Post-Employment Benefits Commission at its initial meeting in Sacramento:

Good morning.  I am Marcia Fritz from Citrus Heights and Vice President of the California Foundation for Fiscal Responsibility.

I have been a practicing CPA for 30 years, providing consulting and auditing services to dozens of state and local government agencies including CalPERS.  As a result of this experience, the Government Accounting Standards Board has appointed me to their Task Force on Pension Accounting Research.

First I want to thank the Governor and legislative leadership for appointing a commission to investigate and propose solutions to the most important government fiscal issue in California -- the growing debt and unsustainable cost of providing retirement benefits for public employees.

The California Foundation for Fiscal Responsibility believes the Commission’s research will provide strong evidence that California’s pension and retirement benefits costs are out of control.  We believe retirement benefit costs must be reduced to protect taxpayers and the vital programs that will educate our children, build our roads, care for our sick and provide public safety for decades to come.  CFFR has a solution that retains the defined benefit system and provides a fair opportunity for a secure retirement after a full 40 year career in government service.

Recognizing that promises made to employees must be kept, no change should be made in the benefits earned by current public employees and retirees.  They have legal right to the existing benefits and only the serious fiscal consequences of keeping those promises should be considered by the Commission.

CFFR wants to be very clear on those two critical points.  We do not seek changes to the retirement benefits owed to current employees and retirees and we want to retain the defined benefit system as a secure foundation for new employee benefits.

But for new, non safety employees at all levels of government and in our schools, the lifetime retirement age should be raised to 65.  Furthermore, except in cases of disability, retiree health benefits should not be available before that age. Recognizing the physical demands of public safety work, their lifetime retirement age should return to 55, just as it was before 2000.  Accordingly, a full career of public safety service should last just 30 years.

The substantial long term savings created by raising the retirement ages for new employees should be used to pay for the mounting unfunded liabilities owed to existing employees.

While there are many details that need to be considered in developing a less costly benefit package for all new California government employees, CFFR believes the Commission should carefully consider these fundamental questions -- What is a fair level of replacement income for retirees?  How long should employees be required to work to earn it?  At what age should lifetime benefits become available?  If a responsible consensus can be reached on these questions, designing a retirement benefits package for new public employees becomes much easier.

CFFR would like to thank Commission members in advance for their work on this important retirement benefits issue.  We stand ready to assist the Commission with both ideas and information in the months ahead.  On behalf of all Californians, we hope the Commission clearly hears this fiscal time bomb ticking and finds a responsible way to limit its damage to budgets and programs in the years ahead.