Acting President Rob Feckner, issued a statement Thursday warning that state government should be careful with what it does to the giant defined pension plan
“CalPERS has more than 70 years experience generating investment income to cover pensions,” Feckner said. “I believe it is unwise to abandon that model for a slap-dash effort to rush onto the law books a defined contribution plan that will be disastrous for everyone.
“Our investment research shows the defined contribution model will provide a meager retirement for most public workers, which today is on average only $20,000 a year, and it will cost more,” he continued. “Public workers will not be allowed to invest in all asset classes and they’ll pay six to seven times more in professional fees for the privilege of investing.”
Feckner questioned the cost to government as well, asserting that instead of reducing the cost, it will add to the state’s costs for years to come.
“Most sadly, it will hurtCalifornia’s economy because it will put an end to any pension monies being plowed back into the California economy,” he also added. “More than $19 billion dollars of our pension assets are invested into real estate, private businesses and communities in California.”
The statement comes a day after Governor Arnold Schwarzenegger said he would back any effort to produce 401(k)-style plans for state employees, reducing the number of people receiving a pension from CalPERS (See Schwarzenegger Supports CalPERS Overhaul Efforts ).
Earlier in the week, a Republican Assemblyman proposed a ballot initiative that would see all workers starting after July 1, 2007 get a 401(k) plan, and not the benefits from the state pension system (See Assemblyman Floats DC Plan for Golden State Employees ). Representative Keith Richman also introduced a constitutional amendment on Friday that would require the same conditions for hired workers as was stated in his bill, which was filed in conjunction with the Howard Jarvis Taxpayers’ Association, according to news reports. Under both initiatives, current workers would also be allowed to opt for a 401(k)-style plan if they wished to. An amendment in California requires the Legislature to vote before and after an election, each time reaching a three-quarters vote.
By delivering a bill to the Legislature and preparing a ballot initiative at the same time, the California GOP is repeating the formula Schwarzenegger used to force a Democratic-controlled Legislature to revamp the workers’ compensation system, according to the San Francisco Chronicle.
Despite calls for such reform, any actual change is unlikely, since Democrats – usually supportive of the pension giant – control the state Legislature, according to a Los Angeles Times news report.