California Governor ARNOLD SCHWARZENEGGER On Government-Employee Compensation And Benefits

Posted By on August 27, 2010

Here is a summary of parts of a Wall Street Journal article by California Governor Arnold Schwartzenegger on government pensions and employee benefit compensation. 

Roughly 80 cents of every government dollar in California goes to employee compensation and benefits.  Spending on California’s state employees over the past decade rose at nearly three times the rate our revenues grew.  The average 401(k) is down nationally nearly 20% since 2007. Meanwhile, the defined benefit retirement plans of government employees—for which private-sector workers are on the hook—have risen in value.  Since 2007, one million private jobs have been lost in California. Median incomes of workers in the state’s private sector have stagnated for more than a decade.  Now  Democratic leadership of the assembly proposes to raise the tax and debt burdens on private employees in order to cover rising public-employee compensation.  Much needs to be done. The Assembly needs to reverse the massive and retroactive increase in pension formulas it enacted 11 years ago. It also needs to prohibit “spiking”—giving someone a big raise in his last year of work so his pension is boosted. Government employees must be required to increase their contributions to pensions. Public pension funds must make truthful financial disclosures to the public as to the size of their liabilities, and they must use reasonable projected rates of returns on their investments. The legislature could pass those reforms in five minutes, the same amount of time it took them to pass that massive pension boost 11 years ago that adds additional costs every single day they refuse to act.  Few Californians in the private sector have $1 million in savings, but that’s effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to a monthly, inflation-protected check of $3,000 for the rest of their lives. 

State employees are hard-working and valuable contributors to our society. But here’s the plain truth: California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.

[schwarzenegger]

And after they’ve finished passing those reforms, they could take another five minutes to pass legislation terminating the annuity give-away they passed in 2003 and ending the immoral practice of pension fund board members accepting gifts or even campaign contributions from lobbyists, salesmen, unions and other special interests.

Reforming government employee compensation and benefits won’t close this year’s deficit. It will, however, protect the next generation of Californians from overwhelming burdens. The same is true with respect to the other reform I’m demanding—the establishment of a rainy-day fund so that legislators can’t spend temporary revenue windfalls.

All of these reforms must be in place before I will sign a budget.

Mr. Schwarzenegger is the governor of California.

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