Keith Richman - Contributor
20 years in medical practice and building a $80 million health
care provider group, California Assemblyman Keith Richman began
his public service by winning the 38th Assembly District in
the north San Fernando Valley, Santa Clarita, Simi Valley and
portions of Glendale and La Cresenta. Assemblyman Richman serves
on the Assembly Health and Insurance Committees and his key
legislative measures include a statewide energy policy framework,
HMO reform, workers' compensation system reforms and expanding
access to medical care for all Californians. Distinguished Sacramento
Bee Columnist Dan Walters said, “Keith Richman is the
sort of person who was supposed to be elected to the Legislature
after term limits loosened the grip of professional politicians
-- someone who saw it as civic service, not a lifetime career.” [Richman
To Public Pension Woes?
Look To The Private Sector…
[Keith Richman] 2/10/05
pension costs are devastating government budgets throughout
California, prompting calls for greater fiscal responsibility
and government accountability. The best solution is the same
type of 401(k) plan offered to most private-sector and some public-sector
Massive pension deficits, generous benefit increases and out-of-control
pension costs across the state clearly illustrate the need for
a new public- employee retirement program. The Bay Area has several
examples of government agencies cutting services to meet pension
Contra Costa County's traditional defined-benefit
plan suffers from a deficit of more than $1 billion, prompting
a grand jury
to predict that cuts in funding for "infrastructure repair,
law enforcement, social welfare and health" will be needed
to pay off the debt. Contra Costa's pension costs have risen
from $29 million (or 5 percent of the county budget) in 1994
to $103 million (or more than 12 percent of the budget) this
year. Reliable estimates show pension costs alone exceeding 20
percent of the county's general fund before the debt is fully
A grand jury in Santa Clara County found pension costs there
have gone up almost 50 percent during the past three years, from
$66 million to $95 million. Oakland is proposing a 3 percent
across-the-board cut in services, including police and firefighters,
to cope with its $15 million jump in pension costs. The City
of Richmond has sent pink slips to nearly half of its firefighters
in recent years as it struggles with its own pension debts.
At the statewide level, California's two largest pension funds,
CalPERS and CalSTRS, are each underfunded by more than $20 billion.
Because of their very design, any defined-benefit pension with
a deficit the stock market can't cover puts taxpayers on the
hook. The state's general fund contributions to CalPERS alone
are expected to jump from $160 million in 2000 to $2.6 billion
this year and to $3.5 billion in 2009.
We would have none of these troubling developments if all government
agencies offered only the same 401(k) program most often used
by the private sector. For politicians, establishing a match
rate for employee contributions is an easy-to-understand decision
with predictable costs -- just the type of fiscal accountability
taxpayers deserve and can afford.
The solution to California's pension crisis is obvious to all
but those lucky few who benefit from the current system. I have
introduced a constitutional amendment to close the public-employee
defined-benefit programs to new employees starting July 1, 2007.
Instead, new public employees would be offered the same type
of 401(k) program provided by most private-sector employers.
Each unit of government would be able to design its own benefits
package within constitutional limits set at levels comparable
to those found in the private sector. Current public employees
would have the option to transfer their retirement assets to
the new plan. Existing government retirement agencies could offer
low-cost investment services that would be attractive to public
employers offering defined contribution plans.
This reform proposal would not impact the benefits promised
to any current public employee or retiree. The promises made
for a secure retirement will be kept. It's just that state and
local taxpayers cannot afford to continue to make these overly
generous promises to new hires. It's time to stop the bleeding.
During his State of the State speech, Gov. Arnold Schwarzenegger
endorsed my plan, and I introduced it again in the special session
he called for the next day. I also am working with the Howard
Jarvis Taxpayers Association to give voters a chance to make
the much-needed reform, should efforts in the Legislature fail.
Politicians too often wait for crisis and controversy before
they address an urgent problem. The evidence is clear that our
current defined-benefit pension system must be reformed. What
is unclear is whether the special interests and their Democratic
vassals in the Legislature will agree to a responsible solution. CRO