The Day After Tomorrow: The Politics of Public Employee Benefits

Abstract

THE CALIFORNIA Journal of Politics & Policy Volume 2, Issue 3 The Day after Tomorrow: The Politics of Public Employee Retirement Benefits D. Roderick Kiewiet California Institute of Technology Abstract The Pew Center estimates that as of July 2008, state and local governments in the United States had promised current and future retirees $3.34 trillion in benefits but had only $2.35 trillion of projected assets to pay for them. The investment losses that public employee pension funds experienced during the market downturn of 2008-09 made the trillion dollar gap much larger. In this paper I discuss how the pension funding gap has developed, compare the situation in California with that of other states, and discuss the ways in which the state government and local gov- ernments in California are responding to the increasing strains pension obligations place on their finances. I recommend that the constitution of California be amended to forbid the state and all local governments from ever again issuing pension obli- gation bonds, and to forbid the state of California, as well as all local governments within the state, from ever again offering their employees defined benefit pension plans. Keywords: public employee pensions, pension funding, defined benefit pension plans, pension obligation bonds www.bepress.com/cjpp