Average Joe Pension

California is undergoing a historic expansion of unfunded pension liabilities. For example, Santa Barbara County’s fire chief is retiring, and his replacement will assume the same annual pay grade of about $200,000. In retirement, the chief will receive an annual pension of about $185,000. No wonder the city cannot hire more firefighters, police officers, and teachers; it costs too much to pay for their retirement.

The state’s liabilities for employee pensions have swelled to over $300 billion and are increasing at $17 billion each year. What to do? Well, one way is bankruptcy. The city of Stockton did that and its retirees will be getting reduced pensions because of it.

There is a better way to reduce unfunded pension liabilities, prevent bankruptcy and help insure that promises can be kept to public employees. But, we cannot look to politicians to solve it as there is no way that any local politician is going to support modifying city, county, or state workers’ pensions. It is just politically untenable. We need to go directly to the people, the people who are paying for these pensions; we need a ballot initiative to go before the voters. Pension reform elements must include a cap on the maximum retirees can receive in retirement, limit annual cost increases on pensions to 1.5 percent, have employees share health-care costs, and eliminate special pay increases that employees use to boost final pension payouts. Importantly, the reform measures should go into effect for all existing employees age 50 or below on the date the initiative passes. And remember, all government employees are free to put some of their paycheck away for their own retirement through an IRA like many of us “working Joes” must do.