Good public policy emerges when targeted solutions solve clearly identified problems. Bad public policy emerges when generalizations (“Public employee pensions are too generous!”) and adversarial thinking (“No private employers provide benefits like that!”) drive the debate.
Here, I wish to analyze two recent and related overcorrection trends in California public retirement law: One that has already occurred in the Legislature and one that may be unfolding now in the courts.
PEPRA
The Great Recession rocked retirement funds across the state and the nation. As plan sponsor contributions were skyrocketing, their revenues were plummeting. This perfect storm was causing state and local agencies to cut services, cut jobs and cut pay, bringing heightened attention to the proportion of their budgets that unfunded pension liabilities would consume for the foreseeable future. The Public Employees’ Pension Reform Act (“PEPRA”), effective January 1, 2013, was passed to rein in pension costs that were viewed as unsustainable.
In the years leading up to PEPRA, there was no shortage of media coverage of “pension abuse.” Extreme cases of pension “spiking” understandably enraged the public and politicians. Ire was directed at more than just the worst spiking offenders, because some systemic flaws also had arisen in California’s pension laws during the flush years of the late 1990s and early 2000s.
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