New California state employees would have to work 10 years longer to qualify for pension benefits under a plan by the state Senate’s top Republican to shave $110 billion off retirement costs over the next three decades.
Minority Leader Dennis Hollingsworth’s bill would require new employees to have 10 more years of service than current workers to get benefits at age 65. Police, firefighters and prison guards would have to work seven years longer before vesting. The bill would base retirement pay on the average of the highest three years of wages, instead of just the last year.
The proposal comes as California’s two public pension funds, the largest in the U.S. with about $350 billion in combined assets, say they may ask taxpayers for more money to support benefits already promised.
“The single biggest threat to California’s fiscal health is pension costs,” Gov. Arnold Schwarzenegger said at a Sacramento news conference with Mr. Hollingsworth.
Three funds — the $213.3 billion California Public Employees’ Retirement System, the $138 billion California State Teachers’ Retirement System, and the $45.9 billion University of California Retirement System — are as much as $500 billion short of meeting future retiree benefits, according to an April 5 study by Stanford University’s Institute for Economic Policy.
The report recommended that the state decrease retiree benefits, increase future contributions from plan members and invest in less risky assets.