LOS ANGELES — Recent studies show that California has an estimated $500 billion in unfunded pension debt. This is a huge burden on the future of our state, and without reform, our state’s budget difficulties will continue.
Recognizing the importance of this issue, Governor Arnold Schwarzenegger has indicated that he will not sign a budget that does not include budget and pension reforms. Moreover, his administration has announced tentative contract agreements with six state employee unions. This is the first significant step in reigning in the state’s pension costs.
“The unsustainable pension system is the single greatest threat to our state’s fiscal health. We recognize the many challenges faced by the governor and the legislature in developing a timely and credible budget, and we support the governor’s demand that pension reforms be a part of that budget,” said L.A. Area Chamber President & CEO Gary Toebben.
Specifically, Gov. Schwarzenegger has outlined the four elements of pension reform that must be in place in order for a budget to receive his signature. These must be done legislatively separate and apart from any memorandums of understanding:
• A rollback of the expansion of pension benefits adopted in Senate Bill 400 for all new hires upon adoption by the legislature
• A permanent 5 percent increase in employee pre-tax contribution toward retirement benefits
• Retirement calculations based on the highest three years of wages during employment, instead of the highest single year
• Accounting that discloses the costs, risks and debts arising from the pension systems
“We cannot continue to cut higher education, health and human services, environmental protection and other important programs in an effort to cover the continually growing pension costs,” Toebben said. “The promises already made must be honored, but we have an opportunity to reform the system for new hires, and we applaud the governor for his efforts to do that.”
The Los Angeles Area Chamber of Commerce represents the interests of business in L.A. County. Founded in 1888, the Chamber promotes a prosperous economy and quality of life in the Los Angeles region. For more information, visit www.lachamber.com.